Krause Fund Research │ Fa l l 2014
Whirlpool Corporation
Hawkeye Pride
Dec. 7, 2014
NYSE: (WHR)
Recommendation: HOLD
Current Price: $188.83
Target Price: $167.00-$174.00
Analysts
John Koenig
Jarod Kerr
John-Koenig@uiowa.edu
Jarod-Kerr@uiowa.edu
Colin Brennan
Yongsen Wang
Colin-p-brennan@uiowa.edu
Yongsen-Wang@uiowa.edu
Building Value for Future Growth
Company Overview
Whirlpool Corporation (WHR) is the largest global
manufacturer and marketer of home appliances including
laundry appliances, refrigerators, cooking appliances,
dishwashers, mixers and other small household products
each sold under various brand names12. Incorporated in 1911
WHR now operates in over 130 countries WHR has brought
in more than $19bln in revenues for FY’13 by distributing
products to most of the world including North America Asia,
EMEA( Europe, Middle East and Africa), and Latin
America. Sales revenues are characterized by large
wholesalers such as Home Depot, Lowe’s, and Best Buy.
Whirlpool has a remained focused on what the consumer
needs through innovation to drive organic growth.
Whirlpool recently has committed itself to capturing world
market share by acquiring established companies in global
markets.
Stock Performance Highlight
52 week High
52 week Low
Beta Value
Average Daily Volume
$190.22
$124.39
1.55
.91 mil.

US major household appliances sector is in
the Declining Life Cycle. With Whirlpool’s
majority of sales from North America, their
ability to diversify revenues will help keep
them competitive.

Significant future value depends on the
acquisition of Hefei Sanyo & Indesit.

Profits will be compressed from increased
competition due to competitors M&A activity

Whirlpool’s historical performance has shown
that they were unable to grow their revenues
organically in the emerging markets. This
signals that they may be unable to
successfully take on the two new transactions
and capture all the value available.
Share Highlights
Market Capitalization
Shares Outstanding
Book Value per share
EPS (2014 est.)
P/E Ratio (ttm)
Dividend Yield
4 Year Avg. Dividend Payout Ratio
$14,700 mil.
77.87mil.
$64.65
$2.91
$12.21
1.70%
29%
YTD Equity Performance: WHR vs. S&P 500
Company Performance Highlights (ttm)
ROA
ROE
Sales
Operating Margin
5.69%
15.27%
$18,960mil.
7.53%
Financial Ratios
Current Ratio
Debt to Equity
1.09
59.29%
Source: google.com/finance 1
EXECUTIVE SUMMARY
The intrinsic value determined through our valuation analysis is
$171.20 as of Dec. 3, 2014. Indicating the stock is overvalued by
the market. We recommend investors hold Whirlpool because of
these reasons: completed M&A transactions could result in value
added in future; majority of sales are from a declining cycle
markets; increased competition from competitor M&A activity;
unable to create organic growth in emerging markets.
Under adverse market conditions from the global financial crisis,
Whirlpool has achieved gross margin expansion from 15.7% to
18.1% in 2013 and continued to be an industry leader in consumer
discretionary12. Whirlpool reinvested $582 million in R&D in
2013, about 3% of its sales. The last two fiscal quarters have seen
increased innovations in products, traditionally the case in order
to prepare for the holiday sales.
If Whirlpool is able to defend their domestic market share and
create value beyond the premiums paid for acquisitions, they
should be able to continue to return value to shareholders. If
Whirlpool continues to make other strategic acquisitions and
leverage economies of scale they will continue to return increased
value.
ECONOMIC OUTLOOK
Gross Domestic Product (GDP)
Real Gross Domestic product is an indicator of an economy’s
well-being measured through wealth and how fast profits grew
with an adjustment for inflation to enable comparability with
other reporting periods9. Real GDP is used to analyze the value
creation of products in a given country or region. The reason this
is used as an economic health indicator is because the
measurements ability to provide a holistic view, however the
applicability to future projections is challenged due to the timing
of information9.
% Contribution to GDP
Personal
Consumption
Government
Spending
Investment by
Businesses and
Households
Net Exports
‐3%
16%
18%
68%
Source: bea.gov The reason this estimate is not a good indication of GDP is
because of the timing of the data release. US economic GDP data
is released 3 times for each quarter: the advance, preliminary, and
final estimate. The estimates are released 4 weeks after the
reporting quarter ended, 2 months after the quarter ends, and 3
months after the quarter ends respectively13.
Since 2009 Real GDP has maintained an average growth rate of
1.9% annually. The advanced estimate for 2014 Q3 3.5% growth.
Historical GDP growth for Whirlpool’s three global business
segments is shown below13.
Historical GDP Growth %
10.00%
5.00%
0.00%
2009
2010
2011
2012
2013
‐5.00%
Asia
Latin Am
EMEA
Source: worldbank.org Housing Starts
The demand for new household appliances is influenced largely
by the amount of new housing starts and remodeling projects.
Housing starts is an estimation of the amount of units worked on
during the month by aggregating issued building permits, new
housing projects, and the number of completed housing projects.
Past information reflects housing starts data to be very volatile. In
the month of September, the Housing Starts Consensus gained
6.8%, an increase from a 12.8% percent drop the previous month
and a 17.8% grain from a year ago13. The building permits issued
also increased from a previous month decline by 1.5%13.
This metric is used as economic indicator because of the ripple
effect it creates through the rest of the economy. Because this
measure is so volatile per month, only a trend analysis using at
least a trailing 5 month average is acceptable to use for analysis14.
This metric can also relate directly to the growth of a household
appliance companies because of the correlation with new houses
being built and new appliance purchased such as those from
Whirlpool. We forecast this metric to have an effect on the growth
rate percentage of North American sales figures. Early in the
forecast we have predicted large percentages in conjunction with
the expectation of banks releasing excess cash into the market.
We believe this will create the largest growth of housing starts to
come in 2015 and return to single digit growth by the end of our
forecast, due to lessening money supply and increasing interest
rates.
Per Capita Disposable Income
The per capita disposable income is defined by IBIS World as an
individual’s ability to purchase goods and services. The metric is
comprised of income earned less items like taxes, savings or fines
and dividing that by the total US population amount15.
Over the last five years, disposable income has grown at a 1.0%
Compound Annual Growth Rate (CAGR), however; our forecast
projects the greatest percent change of 2.8% in 2017 and 2018.
Our estimate is conservative in comparison with 2006 percentage
growth levels for a few reasons. The reason is an inevitable tax
rate increase to pay for the high national debt level. Secondly, a
depressed percentage growth of per capita disposable income is
2 likely to occur while consumers build savings either for their first
time or to recoup the depletion experienced during the economic
downturn. As consumers become comfortable with the amount
they have accumulated, a larger percentage of earnings will be
viewed as disposable project to happen in 2017 and 2018.
Interest Rates
The federal funds rate has been kept low to spur economic growth.
Many companies within the consumer discretionary sector have
acquired a strong balance sheet and are expected to take
advantage of the depressed cost of debt. In October, the FOMC
confirmed the fed funds rate will not change until the next
meeting, keeping it between 0 and ¼%16. The reason for no
changes was because the inflation and GDP were both at
acceptable expansion levels. The ability to take on cheap debt has
been attractive to Whirlpool allowing them to take on $1500
million in new debt.
Corresponding with the enterprise viewpoint, if the fed funds rate
is adjusted upwards to combat excessive growth or inflation, the
consumer will end up having to pay more for to get access to debt
funding if the rate is fixed rather than floating. With floating debt
the consumer will end up paying more because they will have to
pay more when the increase happens, however if it is fixed the
cost will remain unchanged. If the fed continues to keep rates low
consumers will be able to benefit from the depressed rate on new
home mortgages. Increasing the home renovations and low
mortgage rates will drive revenue growth in the household
appliances.
Current Employment Statistics
The current employment statistics are measurements of
employment, wages, and earnings. By using a survey these
statistics are the earliest indicator of a new emerging economic
trends released each month. It is a concurrent indicator of business
activity level and temporary levels reflect business levels more
accurately. October’s employment level was better than the
consensus by 10 bps9. However, the actual growth in the number
of payroll jobs did not beat expectations.
If more people enter the workforce then there are more people that
have access to excess cash to make purchases of discretionary
items. In turn, the consumer discretionary sector growth should
reflect a trailing inverse relationship.
CAPITAL MARKETS
The consumer discretionary S&P 500 index has been outpacing
the annual S&P 500 returns by approximately 5.5% per annum
over the last 5 periods and has moved cyclically with the U.S
economy. When an industry is deemed cyclical, it means that its’
price movements are based off to the actions of the greater market
in effect, when the economy is growing so is your company. We
have a positive outlook for the consumer discretionary industry
because the sector has only returned about 8.25% this year which
is less than 5% of a normal return on a year to date basis.
Source: us.spindicies.com We expect the S&P to finish out the year relatively flat obtaining
an annual return around 15.5%.
INDUSTRY ANALYSIS
Overview
Whirlpool is a part of the Consumer Durables industry group
within the larger consumer discretionary designation. This can be
divided up into 3 Industries:
 Household Durables
 Leisure Equipment and Products
 Textiles, Apparel, & Luxury Goods
Demand in industry is primarily determined by the price of goods
and the costs of running and maintaining appliances. Companies
in the industry are selling 95% of the time to either wholesalers
or retailers2.
The S&P 500 (SPX) is made up of companies in various
industries with one, Consumer Discretionary, making up about
11.7% of the index8. When comparing the S&P 500 Consumer
Discretionary (S5COND) index against the S&P 500 (SPX), the
S&P 500 Consumer Discretionary index has outperformed by
approximately 3.13% on equal weighted annual returns. When
comparing the S&P 500 to the Consumer Discretionary portion
of the S&P 500 un-weighted, the percentage change increases to
5.37%. Historically Consumer Discretionary has posted
performance consistently in line with movement of S&P, but in
the last two years it has increased the gap by 1.46%.
3 
GE's Brillion app permits users to control their
appliances from anywhere in the home. They can
preheat the oven, change the temperature and turn it off
after receiving an alert that what's inside is ready.2
Previously, upscale appliances experienced great sales before
the recession. Their popular expensive smart functionalities are
no longer a disadvantage against cheaper competitor products
because of the technology filtering through the product lines as
the technology becomes a less expensive input.
Regulation
Regulations can affect the household appliance industry on a
product level or enterprise level. One example of a product
regulation was the US Energy Independence and Security Act
of December 2007 establishing stricter efficiency standards for
residential clothes washers and dishwashers. The change in
regulations required product redesign but material effect was
projected 2007A.
Source: us.spindicies.com Sub-sector
Whirlpool is located within the home appliances sub-sector of
household durables. The sector experienced a decline of
disposable income within the US, Japan, and Western Europe
over the last five years. However, sector growth is forecasted to
originate from emerging markets such as Brazil, Russia, India,
China, and South Africa (BRICS)2 as the middle class disposable
income increases. The emerging markets usually have one
company with a dominant market share just within that country,
inspiring opportunities for acquisition related growth for
Whirlpool in the future.
Sector revenue is expected to grow 5.4% in 2014 and 4.3% CAGR
till 20182. The costs in this industry are highly weighted on the
input costs of the products. These inputs mentioned before, such
as the price of steel or aluminum, are volatile and expected to be
around 60% of overall costs. Globally the sector is experiencing
consolidation where AB Electrolux buys GE’s appliance division
and Whirlpool’s two recent completed acquisitions discussed
later.
Trends
Innovation and differentiation strategies through the application
of “smart” and cost efficient products will drive future growth
within a saturated market. Also, as the global economy
strengthens competition will pressure companies to outsource in
order to hold margins at historical levels2.
Advanced features that were found in the upscale appliances
before the recession are now found in the mid-priced appliances.
Examples include:
 Whirlpool's app notifies its users when a wash or dry
cycle is complete and can activate a washer or dryer or
set a refrigerator to an energy-saving mode12.
 LG's smart refrigerator allows customers to view the
current inventory of food items and their freshness
from a smartphones.12
As mentioned in the Whirlpool 2013 Annual Report, a
company with international operations exposes themselves to
lots of risks such as change in international regulations or
varying tax laws.
With international operations for Whirlpool at 46% of the total
revenues in 2013 and a forecasted 56.3% of sales 2015 outside
the United States, Whirlpool is subject to increasing political
risk over our forecast period.
Porter’s Five Forces
1) Industry competition- Competition within the household
appliances sub-segment is high and based mainly on
product price, features, and brand loyalty. The consumer’s
primary focus on upfront price has transitioned to total
cost of owernership2. The difference will change the
competition landscape to emphasize the total value rather
than the original purchase through instruments such as
warranties or reduced operation costs.
2) Threat’s to new entry- The barrier to entry for new firms
on a global scale is the ability to penetrate and diminish
incumbent firms’ market presence and existing
operations2. Globally, this is not expected to rise but is
medium because of the amount of saturation within the
largest markets for this sector.
3) Threat of substitutes-The threat of substitutes in emerging
markets is high. This comes from a very low cost to
outsource household chores, in these areas as well as
cultural differences in preparation and storage of food2.
4) Bargaining power of suppliers- Because companies within
this industry have a large portfolio of suppliers for their
variety of outputs, operating without pricing contracts or
guaranteed supply agreements exposes them to supply and
pricing risks2. Within the industry manufacturers are
subject to price movements in steel and aluminum, but
with forward contracts large Whirlpool has locked in
future supply at pre-determined prices.
5) Bargaining power of consumers (retailers)-Within the
industry the consumers have significant leverage as buyers
4 over their suppliers like Whirlpool. Therefore, other
companies and Whirlpool are making strategic decisions to
gain economies of scale.
Acquisition
To drive global growth, Whirlpool has made several recent
acquisitions in order to take advantage of established brands in
foreign markets.
Industry leaders
Within the domestic industry now that GE Appliance been has
been acquired by AB Electrolux. There are no major
competitors based in the United States. The biggest competitors
listed below. We expect the competition to grow as larger
competitors gain market share abroad
On October 24th 2014, Whirlpool bought a majority stake in the
company Hefei Rongshida Sanyo Electric (Sanyo). Under the
brand names Sanyo, Rongshida/Royal Star and Diqua, the
company produces washers, microwaves and refrigerators in their
three Chinese manufacturing facilities. Whirlpool paid $555
million dollars for a 51% majority stake. Sanyo had a 2013 revenue
of $652 million dollars and has seen a steady growth in an
emerging Chinese market4.
This acquisition was made to combat the negative sales Asian sales
growth of (4.72%) that Whirlpool had in 20131. With the
acquisition of Sanyo we forecast an immediate sales growth in Whirlpools Asian business. Source: IBISWorld.com Asian Revenue Forecast with Sanyo Acquisition (millions of dollars)
2,100.00
1,600.00
COMPANY ANALYSIS
Overview
Whirlpool’s major home appliance products are its core business.
Its kitchen-related products are serving as a complimentary
noncore business. Over the past century, Whirlpool has
established itself as the dominant manufacturer of home
appliances in the United States holding 37.8% of the market
share2.
Life Cycle
Domestically Whirlpool is in the mature stage of its life cycle2.
The saturation in the U.S. will prevent any large exponential
growth and rely on organic growth coming from new product
innovations and increasing brand loyalty in the U.S. On a global
scale Whirlpool is in the early growth stages of its life cycle. The
company has still yet to develop a loyal customer base in
emerging markets countries. According to IBIS World in
reference to the Global Household Cooking and Appliance
Manufacturing industry, “over the next 5 years to 2019, industry
valued added (IVA), which measures the industry's contribution
to the economy, is expected to grow an average 5.7% annually2.
Whirlpool is using acquisitions to grow its presence in the
emerging markets in order to establish more stable growth rates.
Corporate Strategy
Whirlpool’s strategy for success traditionally has been to produce
innovative products that resonate with consumers’ needs. They
focus on developing innovative products for their customers that
are more energy efficient and utilize mobile integration in order
to satisfy a more technology driven customer. Besides product
development, Whirlpool is seeking growth by establishing a
larger presence in global markets through strategic acquisitions
both in developed markets outside of the U.S. as well as emerging
markets.
1,100.00
600.00
2012A
2013A
2014E
2015E
2016E
Whirlpool is trying to improve its sales growth and influence in
Europe by purchasing an Italian company called Indesit. Indesit
also produces home appliances like washing machines, freezers
and ovens. Paying $965 million, Whirlpool received a 66.8%
majority stake in the company that saw $3,398.78 million dollars
in revenue during 2013. Indesit has been suffering from weak
growth due to a slow European recovery from the recession3.
Whirlpool is relying on the fact that merging Indesit and
Whirlpool’s current business will translate into better growth for
both of their brands due to synergies between the companies.
EMEA Revenue with Indesit Acquisition (millions of dollars)
8,000.00
6,662.30 7,000.00
7,050.30 6,000.00
5,000.00
4,000.00
2,874.00 3,024.00 3,640.34 3,000.00
2,000.00
2012A
2013A
2014E
2015E
2016E
Source: investors.whirlpoolcorp.com Financial Summary
Whirlpool’s total revenue growth was greatly impacted by the
2008 recession with negative growth in both 2008 and 2009 of
5 (2.58%) and (9.56%) respectively. In 2010, Whirlpool’s sales
began to recover as each of its global segments except EMEA
experienced positive growth for a combined total growth of
7.41%. The high company growth was driven by the emerging
market business segments including Latin America experiencing
26.69% 2010 growth, and Asia 30.73% in 2010. As North
America’s sales growth steadily recovered from 2010 to 2012
Both Asia’s and Latin America’s growth began to decline
similarly to growth in EMEA causing the company to experience
negative growth of (2.8%) in 20121.
GDP in Asia grew by 6.3%, Whirlpool’s Latin America and
Asian markets had -3.9% and -15.3% growth respectively5. This
negative growth is due to loss of market presence.
2013‐2014 Revenue Growth (Q1‐Q3) compared to GDP growth
4.0%
4.6%
2.2%
6.3%
3.4%
1.9%
1.5%
NA
GDP Growth
‐1.0%
Market Segment Growth
2010
2011
‐6.0%
2012
2013
LA
‐3.9%
GDP Growth
‐11.0%
EMEA
0.35
‐16.0%
0.25
0.15
‐15.2%
Source: investors.whirlpoolcorp.com & worldbank.org
0.05
Substantial Future Obligations
‐0.05
Whirlpool has several future obligations that will affect future
cash flows. The company has operating leases with a present
value of $751.83 million, underfunded domestic pension plans of
$711 million, $233 million of underfunded foreign pension plans,
and $434 million of other postretirement obligations. Whirlpool
also is projected to pay $177 million in future legal settlements1.
‐0.15
NA
LA
EMEA
Asia
Source: investors.whirlpoolcorp.com In 2013 Whirlpool experienced a healthy sales growth of 3.45%
with revenues of $18.769 billion, the highest since the start of the
recession in 2007. This improvement was due mostly because the
continued recovery of the North American market which had
5.68% growth from the previous year, as well as EMEA having
its largest sales growth of 5.22% since the recession. Latin
America continued to regress in sales volume but at a much
smaller negative growth percentage than previous years. Asia was
the only market to see its sales growth percentage decline in
2013. In order to recover some of its market share globally,
Whirlpool is resorting to acquisitions, especially in the case of
Sanyo in Asia1.
Whirlpool Revenue
$19,000
$18,366 $18,769 $18,666 100%
23%
23%
24%
17%
17%
18%
40%
30%
30%
29%
20%
30%
30%
29%
2011
2012
2013
80%
60%
0%
Laundry Appliances
Refrigerators and Freezers
Cooking Appliances
Other
Source: investors.whirlpoolcorp.com $18,143 $18,000
Earnings Analysis
$17,099 $17,000
$16,000
2009
Product Segment Breakdown
2010
2011
2012
2013
Source: investors.whirlpoolcorp.com For the first three quarters of 2014, Whirlpool had an overall
growth in revenue of 1.4% compared to 2013’s first 3 quarters.
Although there is still was an overall growth in the company’s
sales compared to the year before, sales growth percentage in
Asian and Latin America both regressed. Both North America
and EMEA had growth rates that were higher than their
respective GDP growth signaling an increase market share
growth. Even though GDP in Latin America grew by 2.2% and
Whirlpool’s most recent earnings report was for the third quarter
of 2014, and was released October 8th 2014.
Managerial Guidance was as followes6:
Company Wide
 Record operating profit and earnings per share
 Record Q2 Ongoing EPS; up 11 percent year-over-year
 Positive impacts on earnings were mostly driven by
innovative product launches and having the right product
and price mix
 Negative impacts were mostly driven by increasing raw
material prices and effects of foreign currency
North America
 Record operating profit
 Ongoing cost productivity
 Full-year industry growth from housing, replacement and
discretionary demand
6 Latin America
 Market share gains
 Economic indicators support long-term market growth
 Previously announced price increases to offset inflation
and currency
EMEA
 Continued slow market recovery
 Announced acquisition of a majority stake in
Asia
 Ongoing cost productivity
Global SG&A Expense Breakdown (2013)
20.00%
11.20% 14.40%
8.10%
7.50%
10.00%
0.00%
North
America
Latin
America
EMEA
Asia
Source: investors.whirlpoolcorp.com Product Lines & Markets
Products
Whirlpool’s products are sold under five brands that Maytag,
KitchenAid, Brastemp, and Consul. Their products are broken
down into four segments; Laundry Appliances, Refrigerators and
Freezers, Cooking Appliances and Other1. In 2013 the Laundry
Appliance and the Refrigerators and Freezers segment both
accounted for 29% of Whirlpool’s total sales each, while the
Cooking Appliances and the Other segment were 18% and 24%
of the total sales respectively1. The breakdown of Whirlpools
product segment has remained relatively consistent in the past
years.
Global Markets
Whirlpool has operations in 11 countries and markets them under
different brands1. The major product regions for Whirlpool are
North America, Latin America, EMEA, and Asia. North America
made up 54.2% of the company’s sales in 2013, and as
historically been Whirlpool’s largest sales region1.
Higher profit margins in more developed countries that include
the North American and EMEA segments, are more reliant on the
business’s ability to raise manufacturing productivity. Change in
profit margins in the Asian and Latin American segments have
been reliant having the right product mix and low material costs.
Profit margins in all Whirlpool’s international business segments
also heavily rely on the impacts of foreign currency1.
Global Profit Margin Breakdown (2013)
19.4%
18.6%
18.1%
25.0%
11.2%
5.0%
‐15.0%
North
America
Latin
America
EMEA
Asia
Source: investors.whirlpoolcorp.com Global Market
4.3%
‐0.9%
North America
Latin America
16.1%
EMEA
Asia
26.3%
If Whirlpool succeeds in growing its international market share,
they can capitalize on the high profit margins that come from the
emerging markets like Asia and Latin America. The integration of
its recent acquisitions especially the Chinese company Sanyo will
be critical in creating stable growth for Whirlpool.
New Products
54.2%
Other/eliminations
Source: investors.whirlpoolcorp.com Whirlpool has become the leading appliance manufacturer in the
United States, but because of the saturation in the domestic
market it is being forced to seek inorganic growth globally. The
company is putting a heavy focus on expanding its global
presence through acquisition.
As Whirlpool continues to try and expand its presence globally it
must look at key metrics that will determine the value of that
market. Two trends that can be seen is that SG&A expense
increases with doing business internationally especially in the
emerging markets like Latin America and Asia, however; profit
margin also increases due to lower production costs in those
emerging markets1.
Historically Whirlpool’s research and development expense has
been about 2.7% to 2.9% of its annual sales. The R&D expense is
used to improve existing products as well as the innovation of
new products1. Some of the more recent products include its
Affresh cleaning products and water efficiency business, and
Gladiator GarageWorks storage solutions, account for
approximately 22 % of revenue1. With an emphasis on developing
more technologically advanced products we have forecasted an
increasing R&D expense.
Manufacturing Products & Costs
The primary inputs in Whirlpool’s manufacturing include steel,
oil, plastic, and base metals like aluminum, copper, zinc, and
nickel1. Despite price increases and inherent volatility of these
inputs, Whirlpool has achieved eight straight quarters of
operating margin expansion, up 7.3% since 20121. Whirlpool uses
derivatives to mitigate their future production costs. At the
beginning of 2014 Whirlpool had future purchase obligations of
$1.027 billion1. These purchase obligations included both
contracts with material vendors as well as minimum payments to
suppliers.
7 Distribution and Suppliers
Whirlpool has traditionally sold its products directly to retailers
such as Sears and Best Buy. The relationship between the
company and the retail stores is significant in understanding the
terms of the value chain. There has been a recent trend in
popularity and sales growth with home improvement stores such
as Lowe’s and The Home Depot. Whirlpool also sells certain
lines of its products directly to retailers and other manufacturers
for resale in North America under Lowe’s and The Home Depot’s
respective brand names.
Catalysts for Growth
Acquisitions
Whirlpool’s integration with its recent acquisitions is one of the
most crucial catalysts for future growth. With a mature market in
the United States, Whirlpool’s ability to increase growth in sales
will be reliant on how their international business segments
perform. The company has made it clear that they plan to expand
their presence in global markets by acquiring companies that
already obtain a presence in that target market. In order for these
acquisitions to grow the value of their business, Whirlpool must
smoothly merge its existing business with purchased companies
like Sanyo and Indesit. Keeping SG&A costs low and benefiting
from any operating synergies in the purchased companies will
increase Whirlpool’s consolidated profitability. Whirlpool will not
only need to intake the company’s yearly revenues, it will also
need to do so efficiently enough to have high profit margins.
Interest Rate
Another catalyst for growth is interest rates in the market. Interest
rates will affect the cost of money and in turn limit who can
borrow money. As the supply of money is limited the higher rate
a bank can charge making the individuals who are able to borrow
and build, buy, or remodel a house limited.
Product Development
Developing products that differentiate Whirlpool from its
competitors is the most important catalyst of its organic growth.
Creating a product mix that provides the most value to their
customers will increase their market share and brand loyalty,
which will lead to sales growth. With Smart technology being
integrated into the consumer’s life at every level, it provides
Whirlpool with an opportunity to develop products that use those
features. People seek to have all devices connected in order to bring
them instant satisfaction in all parts of their lives. Whirlpool could
see a large increase in organic growth if they have success in
combining the technologies of smart phones or other smart devices
with their home appliances. Besides differentiating their products
using new smart technologies, Whirlpool also can create value for
their customers by continuing to develop products that are more
energy efficient. Not only will these products be appealing because
of the energy cost implications for the customer, they also will
contribute to Whirlpool’s reputation of having sustainable
products. Whirlpool attributed much of its earnings success in Q3
to strong innovative product launches6.
Purchase Obligations
Whirlpool’s ability to control the volatility of the prices it pays
for manufacturing inputs as well as contracts of minimum
payments to its supplier is another catalyst for growth. Locking in
favorable future prices for raw material will allow Whirlpool to
establish stable profit margins and the prices at which it can sell
its products. If input prices increase unexpectedly in the future,
Whirlpool’s hedging efforts will be beneficial and cause growth
in the value of its business. Strong negotiating and an
understanding of how prices of input materials will change, will
be essential for Whirlpool to establish favorable purchase
contract that will lead to growth.
.
Risks
It will be essential for Whirlpool to take advantage of all the
catalysts of growth in order to sustain future success. Each catalyst
also acts as potential risk because of the fact that if Whirlpool fails
to take advantage of them either competitors will, or its business
will suffer.
The necessity to grow globally makes the acquisitions of Indesit
and Sanyo tremendous risks. Indesit has had negative sales growth
for the past few years and if merging the two companies does not
create positive growth for Indesit’s sales, it could have large impact
on Whirlpools total EMEA business segment. Negative growth in
the Asian business segment has been one of the largest factors that
has kept global growth low. With the purchase of the Chinese
company Sanyo, Whirlpool is relying on growth in its market
share. If the integration of the two companies proves to be difficult
and cannot establish synergies between the two companies,
Whirlpool’s Asian business could suffer even more than it is now.
Whirlpool’s heavy reliance on international markets for business
means that Whirlpool is at risk for negative changes in foreign
currency. According to managerial guidance, foreign currency was
a consistent factor that hurt Whirlpool’s Q3 earnings6. One way for
Whirlpool to limit its foreign currency risk is to use forward
currency contracts similar to how they hedge against rising
manufacturing input costs.
VALUATION DISCUSSION
Valuation Summary
Using multiple valuation techniques we conclude a HOLD
recommendation is appropriate for Whirlpool. The valuation
techniques included a Discount Cash Flow (DCF), Economic
Profit (EP), Relative P/E, and Dividend Discount Model
(DDM).
Current Price Per Share
DCF & EP
DDM
Relative P/E 2014E
Relative PEG
$188.83
$170.20
$204.27
$166.15
$131.75
We believe the DCF & EP valuation provides the most accurate
representation of the true intrinsic value of Whirlpool. The reason
for this is because of the possibility for change in management’s
thoughts on dividend payout percentage and fact that our DCF
and EP reflect how the acquisition will help grow the company’s
case in a conservative estimate without the ability to account for
known synergies available in the transactions. By assessing each
of these models and their validity we find that our equity value
target range is $167-$174.
8 Revenue Decomposition and Forecast
Whirlpool’s revenue forecast was derived from two different parts
of the business: organic sales growth from existing operations and
acquisition related growth. By separating the historic organic sales
further by specific regions we were able to forecast the sector
growth percentage for each year using influences from GDP
growth estimations and historical rates. We confirmed that this was
an acceptable technique after calculating R2 of the housing starts
and Per Capita Disposable Income Rates against revenue growth
for North America Segment and GDP vs. revenue growth
percentage for the other three region. This yielded values of Latin
America ~.93basis, EMEA ~.99basis, Asia ~.97basis. After
combining the four different regional estimated revenues,
eliminations of double accounted for sales are subtracted out, held
constant at ~.9% of the four other regions total.
Organic Whirlpool Growth
We broke out Whirlpool’s historical revenue by region of the world
and analyzed year-year growth rates. By averaging the last three
year average historical percentages in conjunction with forecasting
GDP by region allowed us to reach a growth rate assumption per
year.
North America is the biggest weighted percentage and most
predictable part of revenues with ~53.1% in 2012 and ~54.2% in
2013 and an average sales growth percentage of 1.38% over the last
three years, which is characteristic of the mature, saturated market.
After the acquisition revenue is added in to Whirlpool’s, we expect
the percentage of revenue attributable to North America to drop to
44.56% by 2015E.
Latin America held 26.26% of sales in 2013A and experienced
negative growth percentage for 2012 and 2013. However, before
the last two years, depression in sales were growing at above GDP
rates. As Latin America’s GDP forecast outlook remains positive
over the forecast period, we expect that growth will return
conservatively to this regions sales below forecasted GDP at ~2.2%
by 2018E.
EMEA is the second smallest revenue source for Whirlpool at
~16.11% in 2013A. Over the past two reporting periods, EMEA
has seen volatile revenue numbers due to the economic climate and
changing competition within the market. Organic growth from this
region is expected to continue on its current trend ~ (1.8%) due to
strong competition and a slow recovery of the European economy
at ~1.5%, 2014E & 2.7% 2015E.
Asia is the smallest contributor to overall revenue amounts at only
4.3% 2013E. This market has seen an average compression of
(1.85%) for the last three years. We forecast this organic potion of
sales to continue because of slowing GDP and increasing
competition.
Acquisition Revenue Growth Effect
To project revenue growth related to the acquisitions of Sanyo and
Indesit, we looked at their historical growth rates and compared
them with future expectations of GDP growth in their markets Asia
and EMEA, respectively.
Sanyo experienced a rapidly declining CAGR of revenue from 50%
to 3% over 2010A-2012A. We forecasted Sanyo revenue growth
with conservative returns due to no definitive information on the
value of synergies when combined with Whirlpool resulting in a
constant 4.72% growth by 2015E.
Indesit experienced a negative growth rate in 2013E. We expect
that revenue percentage growth will continue to be negative in
2014E with the sluggish economic recovery in the Eurozone, but
reach constant revenue CAGR of 2.7% by 2016E parallel to GDP
growth due to a mature market composition.
Using the projected growth rate for each acquired company and
combining that with the organic growth rate we obtained to obtain
a regional estimate.
Discounted Cash Flow(DCF) & Economic Profit(EP) Models
Using both net operating profit less adjusted taxes (NOPLAT) and
invested capital (IC) calculations, we were able to create a DCF and
EP model producing an equal intrinsic value per share. The DCF
model uses forecasted free cash flow (FCF) estimated over the
forecasting period and continuing value, discounted by the
weighted average cost of capital (WACC) to produce the stock
value at $170.20 per share. The EP model uses the difference
between ROIC and WACC multiplied by beginning IC to obtain an
EP estimate over the forecasting period until a constant ROIC and
growth rate may be applied to a continuing value. Because the
numbers reported reflect the end of the fiscal year 2013 on Dec 31st,
an adjustment is made from the stock price of $169.16. In
comparison to the stock price today, $188.83 our DCF & EP
models are projecting overvaluation.
Relative Forward P/E Valuation
Relative valuation is used to assess the markets sentiment to other
comparable firms. Usually this is completed using companies with
in the same industry, however with the lack of domestic sector
competitors, a mix of different companies matching Whirlpool’s
financial profile is substituted using parameters of profit margin,
growth potential, beta and leverage. The companies include:
Boston Scientific Corp, Cameron International Corp. Ingersollrand PLC, L 3 Communications Hldgs., Mohawk Industries Inc.
General Electric, Stanle Black & Decker Inc., TRW Automotive
holdings Corp., and Xerox.
EPS amounts for 2013A and 2014E from the previously stated
companies and divided by the current stock price as of November
18, 2014. Using the average P/E multiples and applying them to
Whirlpool’s 2014 EPS estimates we are able to determine
Whirlpool is worth $166.15 on a financial operating characteristic
basis.
WACC
Forecasted at 8.3%
Cost of Equity:
The cost of equity is calculated using the Capital Asset Pricing
Model (CAPM) equaling the sum of a risk free rate and raw beta
multiplied by risk premium. The outcome resulted in a cost of
equity of 9.79%. Our risk free rate chosen is equal to the 30-year
Treasury bond yield. A long term rate is used because we do not
see a foreseeable change in risk or default for Whirlpool over the
next 30 years and the time span matches the investment horizon.
The risk premium is calculated using the return of market less the
return of the risk free rate which is 4.64 using geometric long
parameters. Whirlpool’s equity beta was calculated by using the
average of their 5 year weekly betas.
9 Cost of Debt:
Whirlpool’s after tax cost of debt was found by taking an
outstanding bond closest to the investment horizon of 30 years
yield to maturity (YTM) and multiplying by 1 less the marginal tax
rate. The closest bond to the investment horizon is the Whirlpool
Corp Sera Mtn Be 5.15% | Maturity:2043 with a YTM of 4.61%.
Cost of Equity vs. Cost of Debt
The first sensitivity reflects the share price as changes in the capital
structure affect the per share value. Our model reflects moderate
sensitivity to changes in costs of capital because of the changes in
discount rate that would occur in the DCF and the change in
difference between ROIC and WACC in the EP model.
Capital Structure:
We do not see a change in capital structure to come for the longterm investment horizon and have held debt as a percentage of total
assets less cash to maintain WACC percentage rate.
Beta vs. Risk Premium
The second data table reflects the change in our CAPM inputs
would do to cost of equity and WACC for process mentioned in
above. The table shows low sensitivity to changes in the beta, but a
slightly larger movement in stock price as the risk premium varies.
Dividend Discount Model
Through a Dividend Discount Model (DDM) we were able to
produce an intrinsic value of the stock at $203.03. This is obtained
by discounting the future dividends at the cost of equity rate until a
constant growth rate of dividend is achieved. We forecasted the
future dividend to stay in line with 2018 payout ratios of 17.00%.
After the partial year adjustment, the intrinsic value of the stock is
$205.26. This model is useful to our analysis because of the
possibility that Whirlpool’s acquisitions will not add value to the
shareholders and the only value returned to the shareholders will be
through dividends. This valuation model represents the top end of
our price target because of their ability to payout a significant
dividend and we project the payout ratio will continue due to the
increasing supply of cash available as shown in the model.
However, because of the variability in payout percentage we feel
the DCF valuation is much more reliable figure.
Sensitivity Analysis
Sensitivity analysis measures the changes of two variables and their
effect on the intrinsic value.
CV Growth vs. CV ROIC Growth
We sensitize the CV growth rates because of the dependency for
the continuing value formula in both the DCF and EP model. Our
table shows much greater sensitivity of the stock price to the CV
Growth rate, increasing 16.00% compared to ~5.6% on ROIC
Growth when increasing 1.00% on either variable.
Indesit 2015 Growth vs. Sanyo 2015 Revenue growth
We choose to sensitize the growth rates of the two acquisitions in
2015 to show what minimal effect one year’s revenue growth of
either acquisition will have on the intrinsic value of the stock.
COGS % of Revenue vs. SG&A % of Revenue
The final sensitivity analysis is done to show what large effect our
COGS and SG&A have on final valuation. Because these are the
first and second largest expenses on the income statement the
smallest amount change will affect the stock price greatly through
the change in net income, drivers, and FCF. With only a quarter
percent change in either variable a ~$14 effect on stock price is
achieved.
Important Disclaimer
This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was
originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory
board. The report also provides potential employers and other interested parties an example of the students’ skills,
knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed
financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or
sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly
available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time,
the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned
in this report.
10 Works Cited
1) Whirlpool Corporation - Annual Report. (2014, February 18). Retrieved September 17, 2014, from
http://investors.whirlpoolcorp.com/secfiling.cfm?filingID=106640-14-8&CIK=106640
2) Global Household Cooking & Appliance Manufacturing. (2014, July 1). Retrieved November 13, 2014, from
http://clients1.ibisworld.com/reports/gl/industry/industryoutlook.aspx?entid=930
3) Livesey, B. (2014, July 1). Whirlpool to Buy $1 Billion Indesit Stake in European Expansion. Retrieved November 13,
2014, from
http://www.businessweek.com/news/2014-07-10/whirlpool-to-buy-stakes-totalling-67-percent-in-italy-s-indesit
4) Whirlpool Gets Chinese Officials' Nod for Hefei Sanyo Buy. (2014, September 17). Retrieved December 3, 2014, from
http://finance.yahoo.com/news/whirlpool-gets-chinese-officials-nod-143002130.html
5) GDP (current US$). (n.d.). Retrieved November 13, 2014, from
http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
6) Q3 2014 Earnings Presentation. (2014, October 1). Retrieved November 16, 2014, from
http://files.shareholder.com/downloads/ABEA-5DXEK8/3690114798x0x789050/8decd6c1-c962-4037-9ad969d84582ecd2/Q3_2014_Earnings_Presentation_v5_-_FINAL.pdf
7) Major Companies. (2014, July 1). Retrieved November 3, 2014, from
http://clients1.ibisworld.com/reports/gl/industry/majorcompanies.aspx?entid=930
8) S&P Dow Jones Indices. (n.d.). Retrieved November 14, 2014, from http://us.spindices.com/indices/equity/sp-500/
9) U.S. Economic Accounts. (n.d.). Retrieved November 15, 2014, from
http://www.bea.gov/index.htm
10) S&P 500: INDEXSP:.INX quotes & news - Google Finance. (n.d.). Retrieved November 16, 2014, from
http://www.google.com/finance?cid=626307
11) Major Household Appliance Manufacturing in the US. (2014, November 1). Retrieved November 17, 2014, from
http://clients1.ibisworld.com/reports/us/iexpert/default.aspx?entid=789
12) Levy, E. (n.d.). Retrieved September 17, 2014, from
http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/simpleSearchRun.do?ControlName=SubInd
ustryReviewSearch
13) Economic Calendar. (n.d.). Retrieved November 18, 2014, from http://www.bloomberg.com/markets/economiccalendar/
14) Housing Starts. (2014, December 1). Retrieved November 16, 2014, from
http://clients1.ibisworld.com/reports/us/bed/default.aspx?bedid=2598
15) Per Capita Disposible Income. (2014, September 1). Retrieved December 3, 2014, from
http://clients1.ibisworld.com/reports/us/bed/default.aspx?bedid=33
16) Minutes of the Federal Open Market Committee. (2014, October 1). Retrieved November 15, 2014, from
http://www.federalreserve.gov/monetarypolicy/fomcminutes20141029.htm
WHIRLPOOL Corp
Assumptions
Key Valuation Assumptions
Capital Expenditures
Amort. Managerial
CV Growth
CV ROIC
Estimated 5 year EPS growth
Market Value Capital Structure
Divisor
MV of Equity
MV Weight of Equity
MV Short-term Debt
MV Long-term Debt
Operating leases
MV of Debt
MV Weight of Debt
Risk Free Rate*
Risk Premium
2014E
700
22
4.72%
15.40%
6.43%
2015E
700
20
2016E
700
18
2017E
700
17
1,000,000
$11,360.70
74%
$699.00
$2,450.00
$751.83
$3,900.83
26%
3.06%
4.64%
Beta**
1.45
Cost of Equity
9.79%
YTM
4.61%
Cost of Debt***
3.98%
WACC
8.30%
* Risk free rate is equal to treasury 30 year bond yield
**Bloomberg adjusted beta with returns set to weekly and a 5 year time period
***Whirlpool Corp Sera Mtn Be 5.15% | Maturity:2043
2018E
700
17
Revenue Growth Assumptions
Factors of Sales Growth
WHR Average Historical Growth
North America
Latin America
EMEA
Asia
North America Growth Drivers
Housing Data
Per capita Disposable Income
GDP
North America
Latin America
EMEA
Europe
Africa
Asia
East Asia and Pacific
South Asia
Hefei Sanyo Acquisition impact
Asia
Growth
Indesit Acquisition impact
Growth
WHR Forecasted Total Growth
North America
Latin America *
EMEA
Asia**
* Managerial Guidence of -4% growth
** Mangerial Guidence of 0% growth
Marginal Tax Rate Assumption
2.00%
26.69%
#REF!
30.73%
-2.06%
7.84%
2.42%
3.04%
0.51%
-2.21%
-13.04%
-3.86%
6.00%
3.70%
28.20%
18.50%
0.30%
1.60%
1.30%
0.00%
328.53
495.73
50.89%
632.52
27.59%
3,682.02
652.56
3.17%
3,398.78
-8%
1.38%
1.73%
-1.80%
-1.85%
2014E
2015E
2016E
2017E
2018E
11.50%
1.60%
18.70%
2.60%
9.80%
2.30%
-3.00%
2.80%
9.80%
2.80%
2.20%
1.90%
1.50%
1.10%
1.90%
6.25%
3.00%
2.90%
2.70%
1.80%
3.60%
6.50%
3.00%
3.50%
2.70%
1.90%
3.50%
6.50%
3.00%
3.50%
2.70%
1.85%
3.55%
6.50%
3.00%
3.50%
2.70%
1.88%
3.53%
6.50%
7.20%
5.30%
7.10%
5.90%
7.10%
5.90%
7.10%
5.90%
7.10%
5.90%
672.14
3.00%
3,330.80
-2%
715.83
6.50%
762.36
6.50%
811.91
6.50%
864.68
6.50%
3,397.42
2.00%
3,489.15
2.70%
3,583.36
2.70%
3,680.11
2.70%
2.887%
-3.2%
2.3%
0.0%
4.693%
2.0%
6.0%
2.7%
3.275%
2.2%
6.0%
3.4%
2.046%
2.2%
6.0%
3.4%
3.710%
2.2%
6.0%
3.4%
US Federal Tax (35%)
US Foreign Tax Credits
State and Local
Foreign Withholding
Total Taxes
Pre-tax Income
Marginal Tax Rate
2013A
321.00
(231.00)
7.00
29.00
126.00
917.00
13.74%
Balance Sheet Assumptions
Assets
Normal Cash
Electrolux
GE Appliance
LG Electronics
Samsun Electronics
Sanyo Electronic
Comparables Average
2013 Normal Cash
Accounts Receivables
Inventories
Progress Payments
Other current assets
Misc. assets
Net PPE
Bad Debt Expense
Total Investment and Advances
Net other intangibles
Deferred tax assets
Other Assets
Liabilities
Current Portion of LT
Accounts Payable
Income Tax Pay
Other Liabilities
Long-Term Debt
Provision for Risks & Charges
Provision for Risks & Charges
Accrued Comp
Misc. Current Liab.
Shareholder Equity
Additional Paid-In Capital/Capital Surplus
Unrealized Gain/Loss Marketable Securities
Unrealized Gain/Loss Marketable Securities
Other Appropriated Reserves
Treasury Stock
Income Statement Assumptions
Assumption
2013 Level
9.7%
78.9%
3.6%
7.1%
7.4%
6.9%
$ 1,303.33
10.5%
12.5%
-0.9%
5.8%
6.0%
5.0%
0.0%
1,753.20
9.2%
2.9%
21.0%
19.8%
0.0%
2.0%
13.0%
1,950.00
1,950.00
40.0%
1,825.00
16%
0
0
5%
1%
Account
COGS % of Sales
Depreciation
Amortization
R&D
SG&A % of Sales
Marginal Tax Assumption
Minority interest Expense
Dividend per share 1% Decrease
Assumption
81.6%
18.0%
2.0%
3.3%
6.8%
13.7%
3%
22.0%
Whirlpool Future Obligations
Net operating loss Carry forwards
Brazilian government settlements
United States underfunded pension plans
Foreign under funded pension plans
Other postretirement benefits
Legal settlements
Assumptions for Indesit Acquisition
2,700.00
51.00
711.00
233.00
434.00
66.00
REGRESSION ANALYSIS
Housing Starts & Per capita disposable income % change vs.
R Square 0.959028
North America (H & Dis Inc.)
Housing
R Square 0.114014
R Square 0.861817
Disposable income
GDP Growth vs. Revenue growth %
Latin America
R Square 0.931684
R Square 0.999424
EMEA
R Square 0.974604
Asia
Indesit Bought 66.8% For USD
Conversion rate Euro/USD
Equity total value euro
Equity total value USD
66.8% equity value in Euro
66.8% equity value in USD
Goodwill USD
Minority interest in USD
Assets
Inventory
Accounts recievable
Current financial assets
Tax recievables
Other receivables and current assets
Cash
Total Current Assets
PPE
Goodwill and other intangibles
Goodwill from purchase
Other Int. with finite life
Inv. in associates
Other non-current assets
deferred tax assets
Other non-current financial assets
Total Assets
Liabilities
Short-term debt
Provisions for risks and charges
Accounts Payable
Tax payables
Other payables
Total Current Liabilities
Long-term debt
Employee benefits
Provisions for risks and charges
Deferred tax liabilities
Other non-current liabilities
Total Liabilities
Equity Bought
Minority Interest
Total Equity
Total Equity & Liabilities
Assumptions for Sanyo Acquisition
$965.00
0.79
488.40
$621.45
326.25
$415.13
$549.87
$206.32
$440.39
$735.97
$21.25
$21.89
$104.85
$126.73
$1,451.08
$736.86
$327.40
$549.37
$122.53
$0.64
$2.80
$168.21
$2.54
$3,361.43
$398.27
$61.20
$894.64
$29.65
$140.86
$1,524.62
$426.14
$98.49
$77.87
$41.86
$21.63
$2,190.61
$964.50
$206.32
$1,170.82
$3,361.43
Sanyo Bought 51% For USD
Conversion rate USD/CNY
Equity total value CNY
Equity total value USD
51% equity value in CNY
51% equity value in USD
Goodwill in USD
Minority interest in USD
Assets
Cash
Notes recievable
Accounts recievable
Other recievables
Inventory
Prepaid exp.
Total Current Assets
Goodwill from purchase
Long-term equity investment
Fixed Assets
Intangible assets
Deferred tax asset
Total Assets
Liabilities
Notes payable
Accounts payable
Deferred revenue
Wages payable
Tax payable
Other payables
Total Current Liabilities
Long-term debt
Total Liabilities
Equity Bought
Minority interest
Total Equity
Total Equity & Liabilities
$555.00
0.16
1586.69
$257.84
809.21
$131.50
$423.50
$126.34
$83.74
$260.29
$45.65
$1.37
$122.64
$15.29
$528.97
$423.50
$0.23
$96.50
$33.00
$5.75
$1,087.95
$169.98
$138.32
$43.31
$11.51
$9.49
$17.29
$389.89
$16.72
$406.61
$555.00
$126.34
$681.34
$1,087.95
Sensitivity Analysis
Cost of Debt
Risk Premium
CV ROIC
Sanyo 2015 Rev Growth
SG&A % of Sales
$170.20
3.08%
3.38%
3.68%
3.98%
4.28%
4.58%
4.88%
8.89%
$185.96
$184.85
$183.74
$182.65
$181.54
$180.45
$179.36
9.19%
$181.69
$180.60
$179.51
$178.44
$177.34
$176.27
$175.20
$170.20
1.64%
2.64%
3.64%
4.64%
5.64%
6.64%
7.64%
1.3
$239.49
$218.43
$198.56
$179.81
$162.09
$145.36
$129.56
1.35
$238.12
$216.36
$195.87
$176.57
$158.38
$141.24
$125.08
$170.20
13.90%
14.40%
14.90%
15.40%
15.90%
16.40%
16.90%
3.97%
$135.97
$138.70
$141.25
$143.63
$145.86
$147.95
$149.92
4.22%
$142.76
$145.84
$148.71
$151.40
$153.92
$156.28
$158.50
$170.20
-1.0%
1.5%
4.0%
6.5%
9.0%
11.5%
14.0%
-1.0%
$162.50
$164.28
$166.06
$167.85
$169.64
$171.43
$173.23
0.0%
$163.28
$165.06
$166.84
$168.63
$170.42
$172.22
$174.01
$ 170.20
6.4%
6.5%
6.7%
6.8%
7.0%
7.1%
7.3%
81.3%
$216.87
$207.74
$198.58
$189.40
$180.19
$170.94
$161.66
81.4%
$210.54
$201.39
$192.22
$183.02
$173.78
$164.51
$155.19
Cost Of Equity
9.79%
10.09%
$173.34
$169.21
$172.28
$168.17
$171.23
$167.13
$170.20
$166.12
$169.14
$165.08
$168.10
$164.06
$167.07
$163.04
Beta
1.4
1.45
1.5
$236.76
$235.41
$234.06
$214.31
$212.26
$210.23
$193.20
$190.55
$187.93
$173.37
$170.20
$167.06
$154.72
$151.10
$147.52
$137.18
$133.17
$129.23
$120.68
$116.35
$112.09
CV Growth
4.47%
4.72%
4.97%
$150.44
$159.19
$169.25
$153.91
$163.11
$173.69
$157.16
$166.77
$177.83
$181.71
$160.19
$170.20
$163.02
$173.40
$185.34
$165.69
$176.42
$188.75
$168.20
$179.25
$191.96
Indesit 2015 Rev Growth
1.0%
2.0%
3.0%
$164.05
$164.83
$165.61
$165.84
$166.62
$167.40
$167.63
$168.41
$169.19
$169.41
$170.20
$170.98
$171.21
$171.99
$172.77
$173.00
$173.78
$174.57
$174.80
$175.58
$176.37
COGS% of Sales
81.5%
81.6%
81.7%
$204.20
$197.85
$191.48
$195.04
$188.66
$182.28
$185.84
$179.45
$173.04
$176.61
$170.20
$163.76
$167.35
$160.91
$154.44
$158.05
$151.58
$145.08
$148.71
$142.20
$135.67
9.49%
$177.47
$176.40
$175.33
$174.27
$173.20
$172.14
$171.09
10.39%
$165.15
$164.13
$163.12
$162.12
$161.10
$160.10
$159.10
10.69%
$161.15
$160.15
$159.15
$158.17
$157.17
$156.18
$155.20
1.55
$232.71
$208.20
$185.32
$163.95
$143.99
$125.34
$107.90
1.6
$231.37
$206.19
$182.74
$160.88
$140.50
$121.50
$103.78
5.22%
$180.94
$185.98
$190.69
$195.09
$199.21
$203.08
$206.72
5.47%
$194.69
$200.44
$205.81
$210.82
$215.52
$219.94
$224.09
4.0%
$166.39
$168.18
$169.97
$171.76
$173.56
$175.35
$177.15
5.0%
$167.17
$168.96
$170.75
$172.54
$174.34
$176.14
$177.94
81.8%
$185.10
$175.87
$166.61
$157.30
$147.95
$138.56
$129.11
81.9%
$178.71
$169.45
$160.16
$150.82
$141.44
$132.01
$122.52
WHIRLPOOL Corp
Revenue Decomposition
Fiscal Years Ending Dec. 31
Broken Down by Region
North America
Latin America
EMEA
Asia
Other/eliminations
World Wide
2012A
Growth
0.51%
-2.21%
-13.04%
-3.86%
-3.05%
-2.80% $
Sales $
9,631.00
4,950.00
2,874.00
847.00
(159.00)
18,143.00
Growth Sales units
(thousands)
Broken Down by Region
North America
Latin America
EMEA
Asia
World Wide
-5.02%
6.82%
-6.39%
0.35%
24,291.0
12,637.0
11,546.0
4,028.0
52,502.00
2013A
% of Sales
53.08%
27.28%
15.84%
4.67%
-0.88%
100.00%
Average
Unit selling
Price
396.5
391.7
248.9
210.3
$ 345.57
2014E
Growth
Sales $
5.68%
10,178.00
-0.44%
4,928.00
5.22%
3,024.00
-4.72%
807.00
5.66%
(168.00)
3.45% $ 18,769.00
Growth Sales units
(thousands)
6.60%
6.21%
3.13%
-2.76%
25,895.00
13,422.00
11,907.00
3,917.00
55,141.00
% of Sales
54.23%
26.26%
16.11%
4.30%
-0.90%
100.00%
Average
Unit selling
Price
$
393.05
367.16
253.97
206.03
340.38
Growth
Sales $
2.89%
10,471.84
-3.23%
4,768.86
20.62%
3,647.60
13.86%
918.84
5.53%
(177.29)
4.59% $ 19,629.84
2015E
% of Sales
53.35%
24.29%
18.58%
4.68%
-0.90%
100.00%
Growth
4.69%
2.02%
83.05%
68.05%
21.42%
21.42% $
Sales $ % of Sales Growth
10,963.28
46.00% 3.28%
4,865.22
20.41% 2.17%
6,676.94
28.01% 6.05%
1,544.08
6.48% 3.36%
(215.27)
-0.90% 3.83%
23,834.26
100.00% 3.83% $
2016E
Sales $
11,322.33
4,970.83
7,080.83
1,595.92
(223.50)
24,746.40
2017E
% of Sales Growth
45.75% 2.05%
20.09% 2.17%
28.61% 6.05%
6.45% 3.36%
-0.90% 3.29%
100.00% 3.29% $
2018E
Sales $ % of Sales Growth
Sales $
11,553.98
45.20% 3.71% 11,982.64
5,078.74
19.87% 2.17%
5,188.98
7,509.14
29.38% 6.05%
7,963.36
1,649.50
6.45% 3.36%
1,704.87
(230.86)
-0.90% 4.07%
(240.24)
25,560.50
100.00% 4.07% $ 26,599.61
% of Sales
45.05%
19.51%
29.94%
6.41%
-0.90%
100.00%
WHIRLPOOL Corp
Income Statement
Fiscal Years Ending Dec. 31
Income Statement
Sales
COGS excluding D&A
Depreciation
Amortization of Intangibles
Gross Income
Research & Development
SG&A Expense
EBIT (Operating Income)
Nonoperating Income - Net
Interest Expense
Other Expense - Net
Pretax Income
Income Taxes
Consolidated Net Income
Minority Interest Expense
Net Income
EPS
Total Shares Outstanding
Dividends per Share
Payout Ratio
2011A
2012A
18,666.00 18,143.00
15,655.00 14,653.00
530.00
521.00
28.00
30.00
2,453.00
2,939.00
578.00
553.00
1,043.00
1,204.00
832.00
1,182.00
19.00
0.00
213.00
287.00
666.00
337.00
(28.00)
558.00
(436.00)
133.00
408.00
425.00
18.00
24.00
390.00
401.00
2013A
2014E
18,769.00 19,629.84
14,935.00 16,017.95
515.00
547.38
25.00
22.00
3,294.00
3,042.51
582.00
637.97
1,246.00
1,334.83
1,466.00
1,069.71
(99.00)
0.00
177.00
97.94
273.00
0.00
917.00
971.77
68.00
133.53
849.00
838.24
22.00
25.15
827.00
813.10
2015E
2016E
2017E
2018E
23,834.26
19,448.76
724.86
20.00
3,640.65
774.61
1,620.73
1,245.31
0.00
128.84
0.00
1,116.46
153.41
963.05
28.89
934.16
24,746.40
20,193.07
720.38
18.00
3,814.96
804.26
1,682.76
1,327.94
0.00
124.04
0.00
1,203.91
165.42
1,038.48
31.15
1,007.33
25,560.50
20,857.37
716.71
17.00
3,969.42
830.72
1,738.11
1,400.59
0.00
125.71
0.00
1,274.88
175.17
1,099.71
32.99
1,066.72
26,599.61
21,705.28
713.70
17.00
4,163.62
864.49
1,808.77
1,490.36
0.00
127.54
0.00
1,362.83
187.26
1,175.57
35.27
1,140.30
5.12
5.16
10.60
10.50
12.00
12.86
13.55
14.40
76.45
79.00
77.00
77.43
77.87
78.30
78.74
79.17
1.93
2.00
2.38
2.21
2.40
2.44
2.44
2.45
0.38
0.39
0.22
0.21
0.20
0.19
0.18
0.17
1,639.09
1,990.16
2,066.32
2,134.30
2,221.07
1.26%
EBITDA
1,390.00
1,733.00
2,006.00
WHIRLPOOL Corp
Balance Sheet
Fiscal Years Ending Dec. 31
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
Assets
Cash & Short-Term Investments
1109.00
1168.00
1380.00
890.71
959.03
1498.49
2119.68
2755.53
Accounts Receivables, Net
2105.00
2038.00
2005.00
Inventories
2354.00
2354.00
2408.00
Progress Payments & Other
(203.00)
(190.00)
(164.00)
3104.41
3016.76
(176.67)
2448.53
9692.12
2502.60
2979.28
(214.51)
2800.53
9241.44
2598.37
3093.30
(222.72)
2907.70
10097.86
2683.85
3195.06
(230.04)
3003.36
11001.96
2792.96
3324.95
(239.40)
3125.45
11998.89
Other Current Assets
854.00
1267.00
1229.00
Total Current Assets
6422.00
6827.00
7022.00
3102.00
3034.00
3041.00
Net Property, Plant & Equipment
Total Investments and Advances
0.00
0.00
0.00
Net Goodwill
1,727.00
1,727.00
1,724.00
Net Other Intangibles
1,757.00
1,722.00
1,702.00
Deferred Tax Assets
1,893.00
1,832.00
1,764.00
Other Assets
280.00
254.00
291.00
Total Assets
15,181.00
15,396.00
15,544.00
362.00
517.00
617.00
3,512.00
3,698.00
3,865.00
4026.98
3.41
3,024.27
1,908.73
1,977.11
562.25
21,194.87
4002.12
0.00
3,024.27
1,875.73
2,189.36
679.28
21,012.19
3981.74
0.00
3,024.27
1,875.73
2,273.14
705.27
21,958.02
3965.03
0.00
3,024.27
1,875.73
2,347.92
728.47
22,943.38
3951.32
0.00
3,024.27
1,875.73
2,443.37
758.09
24,051.68
955.90
4,919.67
39.14
479.68
4,719.18
-
554.30
4,899.79
-
547.45
5,060.98
-
558.55
5,266.72
-
2,571.89
8,486.60
2,473.29
7,672.15
2,498.10
7,952.19
2,520.25
8,128.68
2,548.51
8,373.78
2,284.18
2,089.08
41.86
512.71
13,414.43
2,639.54
1,950.00
41.86
476.69
12,780.24
2,606.91
1,950.00
41.86
494.93
13,045.90
2,659.74
1,950.00
41.86
511.21
13,291.49
2,707.08
1,950.00
41.86
531.99
13,604.71
243.29
276.87
Liabilities & Shareholders' Equity
ST Debt & Curr. Portion LT Debt
Accounts Payable
Income Tax Payable
-
-
-
Other Current Liabilities
2,423.00
2,295.00
2,312.00
Total Current Liabilities
6,297.00
6,510.00
6,794.00
Long-Term Debt
Provision for Risks & Charges
Deferred Tax Liabilities
Other Liabilities
Total Liabilities
2,129.00
1,944.00
1,846.00
1,917.00
558.00
2,058.00
517.00
1,388.00
482.00
10,901.00
11,029.00
10,510.00
Common Stock Par/Carry Value
106.00
108.00
109.00
142.57
176.15
209.72
Additional Paid-In Capital/Capital Surplus
2,201.00
2,313.00
2,453.00
3,972.50
3,972.50
3,972.50
Retained Earnings
4,922.00
5,147.00
5,784.00
6,426.35
7,173.68
7,989.61
Cumulative Translation Adjustment/Unrealized For
(400.00)
(538.00)
Unrealized Gain/Loss Marketable Securities
(6.00)
10.00
Other Appropriated Reserves
(820.00) (1,531.00)
(770.00)
(981.49) (1,191.71) (1,237.32)
Treasury Stock
(1,822.00) (1,777.00) (2,124.00) (2,222.15) (2,341.32) (2,465.05)
7,337.78
7,789.29
8,469.46
Total Shareholders' Equity
4,181.00
4,260.00
4,924.00
Accumulated Minority Interest
99.00
107.00
110.00
442.66
442.66
442.66
Total Equity
4,280.00
4,367.00
5,034.00
7,780.44
8,231.95
8,912.12
Total Liabilities & Shareholders' Equity
15,181.00 15,396.00 15,544.00 21,194.87 21,012.19 21,958.02
3,972.50
3,972.50
8,864.32
9,810.77
(1,278.02) (1,329.98)
(2,592.86) (2,725.85)
9,209.23 10,004.30
442.66
442.66
9,651.89 10,446.96
22,943.38 24,051.68
WHIRLPOOL Corp
Cash Flow Statement
Fiscal Years Ending Dec. 31
2,011.00
2,012.00
2,013.00
Cash Flow
Operating Activities
Net Income / Starting Line
Depreciation, Depletion & Amortiza
Deferred Taxes & Investment Tax C
Other Funds
Funds from Operations
Changes in Working Capital
Receivables
Inventories
Accounts Payable
Other Accruals
Other Assets/Liabilities
Net Operating Cash Flow
408.00
558.00
(573.00)
163.00
556.00
(26.00)
(15.00)
283.00
25.00
(325.00)
6.00
530.00
425.00
551.00
-(340.00)
636.00
60.00
47.00
(7.00)
240.00
(240.00)
20.00
696.00
827.00
540.00
(105.00)
(4.00)
1,258.00
4.00
(65.00)
(86.00)
275.00
(156.00)
36.00
1,262.00
Investing Activities
Capital Expenditures
Net Assets from Acquisitions
Sale of Fixed Assets & Businesses
Purchase/Sale of Investments
Other Funds
Net Investing Cash Flow
(608.00)
(7.00)
23.00
(4.00)
(596.00)
(476.00)
10.00
(28.00)
(494.00)
(578.00)
(6.00)
6.00
(4.00)
(582.00)
Financing Activities
Cash Dividends Paid
Change in Capital Stock
Issuance/Reduction of Debt, Net
Change in Current Debt
Change in Long-Term Debt
Other Funds
Net Financing Cash Flow
(148.00)
14.00
(15.00)
(2.00)
(13.00)
(17.00)
(166.00)
(155.00)
43.00
(33.00)
6.00
(39.00)
(3.00)
(148.00)
(187.00)
(255.00)
10.00
5.00
5.00
(2.00)
(434.00)
Exchange Rate Effect
Net Change in Cash
Free Cash Flow
Beginning Cash
Ending Cash
(27.00)
5.00
(34.00)
(259.00)
59.00
212.00
(78.00)
1,368.00
1,109.00
220.00
1,109.00
1,168.00
684.00
1,168.00
1,380.00
WHIRLPOOL Corp
Cash Flow Statement
Fiscal Years Ending Dec. 31
2014E
2015E
2016E
2017E
2018E
Cash Flow
Operating Activities
Net Income / Starting Line
Depreciation, Depletion & Amortization
Deferred Taxes & Investment Tax Credit
Changes in Working Capital
Receivables
Change in Acquisition Cash
Inventories
Accounts Payable
Changes in other Current Assets
Changes in other Current Liabilities
Change in Income Tax Payable
Change in Intangible Assets
Change In Goodwill
Change in Other assets
Change in Other Liabilities
Net Operating Cash Flow
813.10
569.38
(171.25)
1,211.23
(1,099.41)
(231.72)
(608.76)
1,054.67
(1,219.53)
259.89
39.14
(228.73)
(1,300.27)
(271.25)
30.71
(2,364.03)
934.16
744.86
(212.24)
1,466.78
601.81
231.72
37.47
(200.49)
(351.99)
(98.60)
(39.14)
13.00
(117.03)
(36.03)
1,507.51
1,007.33
738.38
(83.79)
1,661.92
(95.77)
(114.02)
180.60
(107.18)
24.81
(18.00)
(26.00)
18.24
1,524.62
1,066.72
733.71
(74.78)
1,725.65
(85.48)
(101.76)
161.19
(95.66)
22.14
(17.00)
(23.20)
16.28
1,602.16
1,140.30
730.70
(95.45)
1,775.56
(109.11)
(129.89)
205.74
(122.10)
28.26
(17.00)
(29.61)
20.78
1,622.64
Investing Activities
Change in Investments
Capital Expenditures
Net Investing Cash Flow
(3.41)
(1,533.36)
(1,536.77)
3.41
(700.00)
(696.59)
(700.00)
(700.00)
(700.00)
(700.00)
(700.00)
(700.00)
Financing Activities
Cash Dividends Paid
Change in Capital Stock
Repurchase of Common & Preferred Stk.
Change in Current Debt
Change in Long-Term Debt
Change in Provisions and Risks
Change in AOCI
Change in Minority Interest
Change in Other Appropreated Reserves
Net Financing Cash Flow
Net Change in Cash
(170.75)
1,553.07
(98.15)
338.90
438.18
701.08
528.00
332.66
(211.49)
3,411.50
(489.29)
(186.83)
33.57
(119.17)
(476.23)
355.36
(139.08)
(210.22)
(742.59)
68.32
(191.39)
33.57
(123.73)
74.63
(32.63)
(45.61)
(285.16)
539.45
(192.01)
33.57
(127.80)
(6.85)
52.83
(40.70)
(280.97)
621.20
(193.85)
33.57
(133.00)
11.09
47.34
(51.96)
(286.80)
635.84
Beginning Cash
Ending Cash
1,380.00
890.71
890.71
959.03
959.03
1,498.49
1,498.49
2,119.68
2,119.68
2,755.53
WHIRLPOOL Corp
Balance Sheet
Fiscal Years Ending Dec. 31
#
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
Assets
Cash & Short-Term Investments
Accounts Receivables, Net
Inventories
Progress Payments & Other
Other Current Assets
Total Current Assets
#
#
#
#
#
#
5.94%
14.96%
12.61%
-1.09%
4.58%
34.40%
6.44%
12.97%
12.97%
-1.05%
6.98%
37.63%
7.35%
12.54%
12.83%
-0.87%
6.55%
37.41%
4.54%
12.27%
15.37%
-0.90%
12.47%
49.37%
4.02%
12.66%
12.50%
-0.90%
11.75%
38.77%
6.06%
12.04%
12.50%
-0.90%
11.75%
40.81%
8.29%
12.10%
12.50%
-0.90%
11.75%
43.04%
10.36%
12.01%
12.50%
-0.90%
11.75%
45.11%
#
#
#
#
#
16.62%
32.93%
9.25%
9.41%
10.14%
1.50%
81.33%
16.72%
33.46%
9.52%
9.23%
10.10%
1.40%
84.86%
16.20%
33.45%
9.19%
9.12%
9.40%
1.55%
82.82%
20.51%
34.77%
15.41%
10.23%
10.07%
2.86%
107.97%
16.79%
31.68%
12.69%
10.05%
9.19%
2.85%
88.16%
16.09%
33.42%
12.22%
10.05%
9.19%
2.85%
88.73%
15.51%
35.16%
11.83%
10.05%
9.19%
2.85%
89.76%
14.85%
36.47%
11.37%
10.05%
9.19%
2.85%
90.42%
Liabilities & Shareholders' Equity
ST Debt & Curr. Portion LT Debt
Accounts Payable
Other Current Liabilities
Total Current Liabilities
#
#
#
#
1.94%
18.81%
12.98%
33.74%
2.85%
20.38%
12.65%
35.88%
3.29%
20.59%
12.32%
36.20%
4.87%
25.06%
13.10%
43.23%
2.01%
19.80%
10.38%
32.19%
2.24%
19.80%
10.09%
32.13%
2.14%
19.80%
9.86%
31.80%
2.10%
19.80%
9.58%
31.48%
Long-Term Debt
Provision for Risks & Charges
Deferred Tax Liabilities
Other Liabilities
Total Liabilities
#
#
#
#
#
1.94%
10.27%
0.00%
2.99%
58.40%
2.85%
11.34%
0.00%
2.85%
60.79%
3.29%
7.40%
0.00%
2.57%
56.00%
4.87%
10.64%
0.21%
2.61%
68.34%
2.01%
8.18%
0.18%
2.00%
53.62%
2.24%
7.88%
0.17%
2.00%
52.72%
2.14%
7.63%
0.16%
2.00%
52.00%
2.10%
7.33%
0.16%
2.00%
51.15%
Total Shareholders' Equity
Accumulated Minority Interest
Total Liabilities & Shareholders' Equity
#
#
#
22.40%
0.53%
81.33%
23.48%
0.59%
84.86%
26.23%
0.59%
82.82%
37.38%
2.26%
107.97%
32.68%
1.86%
88.16%
34.23%
1.79%
88.73%
36.03%
1.73%
89.76%
37.61%
1.66%
90.42%
Net Property, Plant & Equipment
Accumulated Depreciation
Net Goodwill
Net Other Intangibles
Deferred Tax Assets
Other Assets
Total Non Current Assets
WHIRLPOOL Corp
Income Statement
Fiscal Years Ending Dec. 31
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
Income Statement
Sales
COGS excluding D&A
Depreciation
Amortization of Intangibles
Gross Income
Research & Development
SG&A Expense
EBIT (Operating Income)
Nonoperating Income - Net
Interest Expense
Other Expense - Net
Pretax Income
Income Taxes
Consolidated Net Income
Minority Interest
Net Income
100.00%
83.87%
2.84%
0.15%
13.14%
3.10%
5.59%
4.46%
0.10%
1.14%
3.57%
-0.15%
-2.34%
2.19%
0.10%
2.09%
100.00%
80.76%
2.87%
0.17%
16.20%
3.05%
6.64%
6.51%
0.00%
1.58%
1.86%
3.08%
0.73%
2.34%
0.13%
2.21%
100.00%
79.57%
2.74%
0.13%
17.55%
3.10%
6.64%
7.81%
-0.53%
0.94%
1.45%
4.89%
0.36%
4.52%
0.12%
4.41%
100.00%
81.60%
2.79%
0.11%
15.50%
3.25%
6.80%
5.45%
0.00%
0.50%
0.00%
4.95%
0.68%
4.27%
0.13%
4.14%
100.00%
81.60%
3.04%
0.08%
15.27%
3.25%
6.80%
5.22%
0.00%
0.54%
0.00%
4.68%
0.64%
4.04%
0.12%
3.92%
100.00%
81.60%
2.91%
0.07%
15.42%
3.25%
6.80%
5.37%
0.00%
0.50%
0.00%
4.86%
0.67%
4.20%
0.13%
4.07%
100.00%
81.60%
2.80%
0.07%
15.53%
3.25%
6.80%
5.48%
0.00%
0.49%
0.00%
4.99%
0.69%
4.30%
0.13%
4.17%
100.00%
81.60%
2.68%
0.06%
15.65%
3.25%
6.80%
5.60%
0.00%
0.48%
0.00%
5.12%
0.70%
4.42%
0.13%
4.29%
WHIRLPOOL Corp
Value Driver Estimation
NOPLAT
Fiscal Years Ending Aug. 31
Net Sales
Less: Cost of Goods Sold
Less: SG&A
Less: Depreciation
Add: Amortization
Less: R&D Expense
Add: Implied operating lease interest
EBITA
$
2011A
18,666.00
15,655.00
1,043.00
530.00
28.00
578.00
28.88
916.88 $
Total Income Tax Provision
Add: Tax shield on interest expense
Less: Tax on interest income
Add: Tax shield on amortized goodwill
Add: Tax shield on restructuring
(436.00)
311.89
14.64
(5.86)
199.14
Add: Tax shield on implied operating lease interest
Add: Tax shield on any non-operating losses
Total adjusted taxes
EBITA less adjusted taxes
Add: Increase (decrease) in deferred tax liability
NOPLAT
3.97
(27.82)
59.97
856.91
(588.00)
268.91 $
Invested Capital
Fiscal Years Ending Aug. 31
Normal cash
Trade receivables
Inventory
Other current operating assets
Operating Current Assets
$
$
Non Interest-Bearing Current Liabilities:
Accounts payable
Other payables
Income taxes payable
Operating Current Liabilities
$
Operating Working Capital
$
Add: Net PPE
$
1,296.18
2,105.00
2,354.00
854.00
6,609.18
3,512.00
2,423.00
0.00
5,935.00
$
$
674.18 $
3,102.00
$
2012A
18,143.00
14,653.00
1,204.00
521.00
30.00
553.00
29.07
1,271.07 $
2013A
18,769.00
14,935.00
1,246.00
515.00
25.00
582.00
29.90
1,545.90 $
133.00
91.55
(7.66)
0.00
75.60
68.00
24.32
(6.73)
0.41
26.93
3.99
0.00
296.49
974.58
61.00
1,035.58
$
4.11
13.60
130.64
1,415.25
68.00
1,483.25
$
1,303.33
2,005.00
2,408.00
1,229.00
6,945.33
1,259.86
2,038.00
2,354.00
1,267.00
6,918.86
3,698.00
2,295.00
0.00
5,993.00
$
3,865.00
2,312.00
0.00
6,177.00
925.86 $
3,034.00
$
2014E
19,629.84
16,017.95
1,334.83
547.38
22.00
637.97
39.59
1,153.30 $
133.53
13.46
0.00
(178.66)
0.00
2015E
23,834.26
19,448.76
1,620.73
724.86
20.00
774.61
39.35
1,324.65 $
153.41
17.70
0.00
0.00
0.00
165.42
17.04
0.00
0.00
0.00
$
5.44
0.00
(26.24)
1,179.54
(171.25)
1,008.29 $
5.41
0.00
176.52
1,148.13
(212.24)
935.89 $
$
1,363.11
3,104.41
3,016.76
2,448.53
9,932.80
1,655.06
2,502.60
2,979.28
2,800.53
9,937.47
$
4,919.67
2,571.89
39.14
7,530.70
768.33
$
3,041.00
$
$
$
4,719.18
2,473.29
0.00
7,192.48
2,402.10
$
4,026.98
$
2016E
24,746.40
20,193.07
1,682.76
720.38
18.00
804.26
39.15
1,403.09 $
$
175.17
17.27
0.00
0.00
0.00
5.38
0.00
187.84
1,215.24
(83.79)
1,131.46 $
1,718.40
2,598.37
3,093.30
2,907.70
10,317.78
$
4,899.79
2,498.10
0.00
7,397.89
2,744.99
$
4,002.12
$
2017E
25,560.50
20,857.37
1,738.11
716.71
17.00
830.72
38.98
1,473.57 $
$
187.26
17.52
0.00
0.00
0.00
5.36
0.00
197.80
1,275.77
(74.78)
1,200.99 $
1,774.93
2,683.85
3,195.06
3,003.36
10,657.21
2018E
26,599.61
21,705.28
1,808.77
713.70
17.00
864.49
38.85
1,563.21
$
5.34
0.00
210.12
1,353.09
(95.45)
1,257.64
1,847.09
2,792.96
3,324.95
3,125.45
11,090.45
$
5,060.98
2,520.25
0.00
7,581.22
$
5,266.72
2,548.51
0.00
7,815.23
2,919.89
$
3,075.98
$
3,275.22
3,981.74
$
3,965.03
$
3,951.32
Other Operating Assets:
Net intangible assets
Capitalized PV of operating leases
Other operating assets
Add: Net other operating assets
1,757.00
726.29
280.00
2,763.29
1,722.00
731.12
254.00
2,707.12
1,702.00
751.83
291.00
2,744.83
1,908.73
995.60
562.25
3,466.58
1,875.73
989.45
679.28
3,544.46
1,875.73
984.41
705.27
3,565.42
1,875.73
980.28
728.47
3,584.49
1,875.73
976.89
758.09
3,610.72
Other Operating Liabilities:
Other operating liabilities
Provision for Risks & Tax Liabilities
Less: Net other operating liabilities
Invested Capital
558.00
2,129.00
2,687.00
3,852.46
517.00
1,917.00
2,434.00
4,232.98
482.00
2,058.00
2,540.00
4,014.16
512.71
1,388.00
1,900.71
7,994.95
476.69
2,089.08
2,565.76
7,725.82
494.93
1,950.00
2,444.93
8,022.12
511.21
1,950.00
2,461.21
8,164.29
531.99
1,950.00
2,481.99
8,355.27
$
Fiscal Years Ending Dec. 31
NOPLAT
Beg. Invested Capital
ROIC
Fiscal Years Ending Dec. 31
NOPLAT
Less: Change in Invested Capital
FCF
Fiscal Years Ending Dec. 31
Beg. Invested Capital
ROIC
WACC
EP
$
2011A
268.91
4,317.45
6.23%
$
$
2012A
1,035.58
3,852.46
26.88%
2013A
1,483.25
4,232.98
35.04%
$
2011A
268.91
(464.98)
733.89 $
2012A
1,035.58
380.51
655.07 $
2013A
1,483.25
(218.81)
1,702.07 $
$
2011A
4,317.45
6.23%
8.30%
(89.55) $
2012A
3,852.46
26.88%
8.30%
715.73 $
2013A
4,232.98
35.04%
8.30%
1,131.81 $
$
2014E
1,008.29
4,014.16
25.12%
$
$
$
2015E
935.89
7,994.95
11.71%
2016E
1,131.46
7,725.82
14.65%
2017E
1,200.99
8,022.12
14.97%
2018E
1,257.64
8,164.29
15.40%
2014E
1,008.29
3,980.79
(2,972.49) $
2015E
935.89
(269.13)
1,205.02 $
2016E
1,131.46
296.30
835.16 $
2017E
1,200.99
142.17
1,058.82 $
2018E
1,257.64
190.98
1,066.66
2014E
4,014.16
25.12%
8.30%
675.01 $
2015E
7,994.95
11.71%
8.30%
272.10 $
2016E
7,725.82
14.65%
8.30%
490.01 $
2017E
8,022.12
14.97%
8.30%
534.94 $
2018E
8,164.29
15.40%
8.30%
579.79
WHIRLPOOL Corp
Weighted Average Cost of Capital (WACC) Estimation
WACC Calcuation
CAPM
Risk Free Rate
Risk Premium
Beta
Cost of Equity
3.06%
4.64%
1.45
YTM
4.61%
9.79%
Cost of Debt
Cost of Debt
3.98%
MV Equity
MV ST-Debt
MV LT-Debt
MV Operating leases
W. of Equity
W. of Debt
11,360.70
699.00
2,450.00
752.00
74%
26%
8.30%
Weights of Captial
WACC
WHIRLPOOL Corp
Discounted Cash Flow (DCF) and
Economic Profit (EP) Valuation
Models
Key Inputs:
CV Growth
CV ROIC
WACC
Cost of Equity
For Discounting:
Number of Periods
Today
Next FYE
Last FYE
Days in FY
Days to FYE
Elapsed Fraction
5%
15.40%
8.30%
9.79%
DCF Model
Fiscal Years Ending Dec. 31
2013A
WACC
FCF
Continuing Value
Total Cash Flows to Discount
Discount Periods
PV of Cash Cash Flows
Value of Operating Assets
$
Add:
Excess Cash
Mkt Securities
Tax Asset Carryforwards
Esops
Minority Interest
Value of Equity
# of shares outstanding
Intrinsic Value of Share 12/31/13
$
$
Adjusted stock price
$
170.20
United States pension
Foreign pension plans
Other postretirement
Legal settlements
EP Model
Fiscal Years Ending
NOPLAT
Invested Capital
Δ Invested capital
WACC
ROIC
Economic Profit
2013A
1,483.25
4,014.16
Continuing Value
Economic Profit to Discount
Discount Periods
PV of FCF
$
Add: Non-Operating Assets
Excess Cash & S-T Investments
Mkt Securities
Tax Assets Carryforwards
Adjusted stock price
2015E
2016E
2017E
2018E
8.30%
(2,972)
1,205
835
1,059
1,067
(2,972.49)
1
(2,744.62)
1,205.02
2
1,027.35
835.16
3
657.43
2014E
1,008.29
7,994.95
3,980.79
8.30%
25%
675.01
2015E
935.89
7,725.82
(269.13)
2016E
1,131.46
8,022.12
296.30
2017E
1,200.99
8,164.29
142.17
2018E
1,257.64
8,355.27
190.98
12%
272.10
15%
490.01
15%
534.94
15%
579.79
675.01
1.00
623.26
272.10
2.00
231.98
490.01
3.00
385.74
534.94
4.00
388.82
16,170.98
16,170.98
4.00
11,753.87
24,335.27
1,058.82 24,335.27
4
4
769.60 17,688.08
17,397.84
2,463.00
751.83
51.00
711.00
233.00
434.00
66.00
235.77
110.00
13,025.02
77.00
169.16
Less: Debt & Other Claims
PV of Total Debt
PV Operating Leases
Brazillian government settlment
United States pension
Foreign pension plans
Other postretirement
Legal settlements
Esops
Minority Interest Liabilities
Value of Equity
Number of shares
Intrinsic Value at Dec. 31 2013
2014E
308.39
3.41
370.99
Less:
Debt
PV Operating Leases
Brazillian government settlment
PV (Economic Profit)
+Beginning Invested Capital
Value of Operating Assets
12/7/2014
12/31/2014
12/31/2013
365
24
0.066
13,383.67
4,014.16
17,397.84
308.39
3.41
370.99
$
$
$
2,463.00
751.83
51.00
711.00
233.00
434.00
66.00
235.77
110.00
13,025.02
77.00
169.16
170.20
WHIRLPOOL Corp
Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
Fiscal Years Ending Dec. 31
2013E
2014E
2015E
2016E
2017E
2018E
EPS
10.60
10.50
12.00
12.86
13.55
14.40
2.44
4.00
1.68
19.72x
14.40
284.03
284.03
4.00
195.50
Key Assumptions
CV growth
CV ROE
Cost of Equity
4.72%
11.40%
9.79%
Future Cash Flows
P/E Multiple
EPS(next period)
Future Stock Price
Dividends Per Share
Number of Periods
Future Cash Flows
2.21
1.00
2.01
Intrinsic Value at Dec. 31 2013
$ 203.03
Adjusted Stock Price
$ 204.27
2.40
2.00
1.99
2.44
3.00
1.85
WHIRLPOOL Corp
Relative Valuation Models
Ticker
BSX
CAM
IR
LLL
MHK
GE
SWK
TRW
WHR
XRX
Company
BOSTON SCIENTIFIC Cor
CAMERON INTERNATIO
INGERSOLL-RAND PLC (
L 3 COMMUNICATIONS
MOHAWK INDUSTRIES I
GENERAL ELECTRIC
STANLEY BLACK & DECK
TRW AUTOMOTIVE HOL
WHIRLPOOL Corp
XEROX CORPORATION
$
$
$
$
$
$
$
$
$
$
WHR
WHIRLPOOL Corp
$ 189.15
Implied Value:
Relative P/E (EPS13)
Relative P/E (EPS14)
PEG Ratio (EPS13)
PEG Ratio (EPS14)
Price
13.05
51.25
63.85
123.40
153.19
26.47
95.45
103.44
189.15
14.19
$
$
$
$
EPS
2013A
$0.46
$3.29
$2.67
$8.24
$6.55
$1.64
$4.98
$6.89
$10.60
$1.09
EPS
2014E
$0.83
$4.12
$3.23
$7.45
$8.12
$1.67
$5.56
$7.74
$11.63
$1.12
Average
$10.60
$10.50
199.76
166.15
148.32
131.75
P/E 13
28.4
15.6
23.9
15.0
23.4
16.1
19.2
15.0
17.8
13.0
18.8
P/E 14
15.7
12.4
19.8
16.6
18.9
15.9
17.2
13.4
16.3
12.7
15.8
17.8
18.0
Est.
5yr Gr.
10.52
16.41
12.8
3.72
19.3
7.6
10.7
9.1
14.2
4.0
6.43
PEG 13
2.70
0.95
1.87
4.03
1.21
2.13
1.79
1.66
1.26
3.25
2.2
2.8
PEG 14
1.49
0.76
1.54
4.45
0.98
2.09
1.60
1.48
1.15
3.17
2.0
2.8
WHIRLPOOL Corp
Key Management Ratios
Fiscal Years Ending Dec. 31
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
1.02
0.51
0.18
1.05
0.49
0.18
1.03
0.50
0.20
1.14
0.47
0.10
1.20
0.45
0.13
1.27
0.52
0.19
1.35
0.59
0.26
1.43
0.66
0.33
1.23x
7.93x
8.52x
1.18x
7.71x
8.76x
1.21x
7.79x
9.28x
.93x
6.51x
7.68x
1.13x
8.00x
8.50x
1.13x
8.00x
9.70x
1.11x
8.00x
9.68x
1.11x
8.00x
9.71x
Financial Leverage Ratios
Total Debt/Total Equity %
EBIT/ Interest Expense (x) Int. Coverage
Total Debt/Total Assets (%)
58.20%
3.91x
16.41%
56.35%
4.12x
15.98%
48.93%
8.28x
15.85%
41.64%
10.92x
15.29%
37.89%
9.67x
14.84%
35.47%
10.71x
14.40%
33.23%
11.14x
13.98%
31.26%
11.69x
13.58%
Profitability Ratios
Gross Margin (%)=(Sales-COGS)/ Sales
Return on Assets (%)= NI/Total Assets
Return on Equity (%)=NI/Shareholder's Equity
Return on Invested Capital (%)= NOPLAT/Beg IC
16.13%
2.57%
9.33%
6.23%
19.24%
2.60%
9.41%
26.88%
20.43%
5.32%
16.80%
35.04%
18.40%
3.84%
11.08%
25.12%
18.40%
4.45%
11.99%
11.71%
18.40%
4.59%
11.89%
14.65%
18.40%
4.65%
11.58%
14.97%
18.40%
4.74%
11.40%
15.40%
Payout Policy Ratios
Dividend payout Ratio=Div./EPS
37.72%
38.77%
22.40%
21.00%
20.00%
19.00%
18.00%
17.00%
Liquidity Ratios
Current Ratio= Current Assets/Current Liab.
Quick Ratio=(Cash & Equiv. + Mkt Securities +AR)/CL
Cash Ratio=( Cash & Equiv.)/CL
Activity or Asset-Management Ratios
Total Asset Turnover (.)= Sales/Total Assets
Inventory Turnover (x)= Sales/ Inventory
Receivables Turnover (x)=Sales/ Average AR
x
2005
Present Value of Operating Lease Obligations
x
2006
Present Value of Operating Lease Obligations
Operating
Leases
85
63
49
26
18
9
250
22
228
Fiscal Years Ending Dec. 31
2006
2007
2008
2009
2010
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Capitalization of Operating Leases
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Lease
Commitment
85
63
49
26
18
9
3.98%
1.0
PV Lease
Payment
81.7
58.3
43.6
22.2
14.8
7.1
227.8
Capitalization of Operating Leases
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Lease
Commitment
186
153
122
91
84
84
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Lease
Commitment
298
246
225
29
56
56
3.98%
13.0
PV Lease
Payment
286.6
227.5
200.2
24.8
46.1
460.0
1245.2
Operating
Leases
184
149
112
97
79
214
835
109
726
Fiscal Years Ending
2012
2013
2014
2015
2016
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Capitalization of Operating Leases
3.98%
2.5
PV Lease
Payment
178.9
141.5
108.5
77.9
69.1
162.2
738.1
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
Year
1
2
3
4
5
6 & beyond
PV of Minimum Payments
Lease
Commitment
184
149
112
97
79
79
Fiscal Years Ending
2008
2009
2010
2011
2012
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Operating
Leases
144
114
81
365
47
96
847
106
741
Capitalization of Operating Leases
x
2011
Present Value of Operating Lease Obligations
Operating
Leases
186
153
122
91
84
211
847
109
738
Pre-Tax Cost of Debt
Number Years Implied by Year 6 Payment
Operating
Leases
298
246
225
29
56
726
1580.287263
335
1245
Fiscal Years Ending
2007
2008
2009
2010
2011
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Capitalization of Operating Leases
x
2010
Present Value of Operating Lease Obligations
Fiscal Years Ending
2011
2012
2013
2014
2015
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
x
2007
Present Value of Operating Lease Obligations
Pre-Tax Cost of Debt
Number Years Implied by Year 6 P
PV Lease
Payment
177.0
137.8
99.6
83.0
65.0
163.9
726.3
Fiscal Years Ending
2009
2010
2011
2012
2013
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Operating
Leases
150
114
91
68
58
101
582
67
515
Capitalization of Operating Leases
3.98%
2.0
Pre-Tax Cost of Debt
Number Years Implied by Year 6 P
x
2009
Present Value of Operating Lease Obligation
Fiscal Years Ending
2010
2011
2012
2013
2014
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Operating
Leases
186
159
126
99
79
248
897
121
776
Capitalization of Operating Leases
3.98%
1.7
Pre-Tax Cost of Debt
Number Years Implied by Year 6 P
3.98%
3.1
Lease PV Lease
Year
Commitment Payment
1
144
138.5
2
114
105.4
3
81
72.1
4
365
312.3
5
47
38.7
6 & beyond
47
74.5
PV of Minimum Payments
741.4
Lease PV Lease
Year
Commitment Payment
1
150
144.3
2
114
105.4
3
91
81.0
4
68
58.2
5
58
47.7
6 & beyond
58
78.8
PV of Minimum Payments
515.4
Lease PV Lease
Year
Commitment Payment
1
186
178.9
2
159
147.1
3
126
112.1
4
99
84.7
5
79
65.0
6 & beyond
79
188.4
PV of Minimum Payments
776.1
x
2012
Present Value of Operating Lease Obligations
x
2013
Present Value of Operating Lease Obligations
x
2014 LTM
Present Value of Operating Lease Obligation
Fiscal Years Ending
2013
2014
2015
2016
2017
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Operating
Leases
194
156
129
100
87
165
831
100
731
Capitalization of Operating Leases
3.98%
2.7
x
2008
Present Value of Operating Lease Obligations
Pre-Tax Cost of Debt
Number Years Implied by Year 6 P
Fiscal Years Ending
2014
2015
2016
2017
2018
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Operating
Leases
201
163
135
119
89
144
851
99
752
Capitalization of Operating Leases
3.98%
1.9
Lease PV Lease
Year
Commitment Payment
1
194
186.6
2
156
144.3
3
129
114.8
4
100
85.6
5
87
71.6
6 & beyond
87
128.3
PV of Minimum Payments
731.1
Pre-Tax Cost of Debt
Number Years Implied by Year 6 P
Fiscal Years Ending
2013
2014
2015
2016
2017
Thereafter
Total Minimum Payments
Less: Interest
PV of Minimum Payments
Operating
Leases
298
246
225
29
56
142
996
102
894
Capitalization of Operating Leases
3.98%
1.6
Lease PV Lease
Year
Commitment Payment
1
201
193.3
2
163
150.8
3
135
120.1
4
119
101.8
5
89
73.2
6 & beyond
89
112.6
PV of Minimum Payments
751.8
Pre-Tax Cost of Debt
Number Years Implied by Year 6 P
3.98%
2.5
Lease PV Lease
Year
Commitment Payment
1
298
286.6
2
246
227.5
3
225
200.2
4
29
24.8
5
56
46.1
6 & beyond
56
109.1
PV of Minimum Payments
894.3
VALUATION OF OPTIONS GRANTED IN ESOP
Ticker Symbol
Current Stock Price
Risk Free Rate
Current Dividend Yield
Annualized St. Dev. of Stock Returns
Range of
Outstanding Options
Range 1
Total
Number
of Shares
2,175,000
2,175,000
WHR
189.15
3.06%
1.81%
28.30%
Average
Exercise
Price
77.18
$ 77.18
Average
Remaining
Life (yrs)
5.00 $
5.00 $
B-S
Option
Price
108.40 $
108.40 $
Value
of Options
Granted
235,771,448
235,771,448
Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding
Number of Options Outstanding (shares):
Average Time to Maturity (years):
Expected Annual Number of Options Exercised:
Current Average Strike Price:
Cost of Equity:
Current Stock Price:
Increase in Shares Outstanding:
Average Strike Price:
Increase in Common Stock Account:
Change in Treasury Stock
Expected Price of Repurchased Shares:
Number of Shares Repurchased:
Shares Outstanding (beginning of the year)
Plus: Shares Issued Through ESOP
Less: Shares Repurchased in Treasury
Shares Outstanding (end of the year)
2,175,000
5.00
435,000
$
$
77.18
9.79%
189.15
2013E
2014E
2015E
2016E
2017E
2018E
435,000
435,000
435,000
435,000
435,000
435,000
$
77.18 $
77.18 $
77.18 $
77.18 $
77.18 $
77.18
33,573,300
33,573,300
33,573,300
33,573,300
33,573,300
33,573,300
$
347,000
189.15 $
519
77,000,000
435,000
519
77,434,481
98,149
207.66 $
473
77,434,481
435,000
473
77,869,008
119,171
227.99 $
523
77,869,008
435,000
523
78,303,486
123,732
250.31 $
494
78,303,486
435,000
494
78,737,991
127,802
274.81 $
465
78,737,991
435,000
465
79,172,526
132,998
301.70
441
79,172,526
435,000
441
79,607,086