Being a Good Middle Man

WHIRLPOOL CORPORATION CONFIDENTIAL

INDIANA UNIVERSITY INSTITUTE OF BUSINESS ANALYTICS

NOVEMBER 2014

21 November 2014 1Justin Hanig


• Short Biography

• Whirlpool Corporation

• About

• Analytical Organization of Whirlpool

• My Team

• Opportunities at Whirlpool for Individuals with an Analytical Background

• Analytical Business Application Demonstration

• Analytically Solved Problem at Whirlpool

• Industry Forecasting

• Presentation Examples

ROADMAP FOR TODAY

21 November 2014 2

GO HOOSIERS!


•Born & Currently Live in South Bend, IN

• Married since 2011; Father since 2013 (Griffin)

•BS in Biology from Indiana University (2005)

• Minors: English, Economics, & Chemistry

•MA in Applied Economics from Western Michigan University (2010)

•Currently – finishing dissertation for PhD in Applied Economics from Western Michigan University

• Dissertation Topic: International Finance (Integrated vs. Segmented Equity Markets)

•Whirlpool since 6/2012

• Insights & Strategy Manager

21 November 2014 3

ABOUT JUSTIN


WHIRLPOOL CORPORATION

21 November 2014 4


Founded in 1911 – Over a Century of Success

Leader of $150B Global Industry

#1 Global Manufacturer & Marketer of Home Appliances

~$20B revenue annually

ABOUT WHIRLPOOL CORPORATION

Where Moments Matter™

WHIRLPOOL CORPORATION CONFIDENTIAL 6

1911-1948 1948-1980 1980’s 1990’s 2013

+

OUR HISTORY PROPELS US WITHOUT BEING AN ANCHOR


STRATEGIC DIRECTION: GLOBAL CONSUMER PRODUCTS

Today Future“Leading Global Appliance

Manufacturer”“Leading Global Innovative

Products Company”“Leading Global ConsumerBrand/Products Company”

GROW THE CORE EXTEND THE CORE+ +

GROWTH OPPORTUNITIES IDENTIFIED IN EVERY CATEGORY

T-12 major appliancesProducts or services which are

dependent on and related to core business

High-margin, stand-alone businesses that leverage core

competencies and infrastructure

EXPAND BEYOND THE CORE


WORLD’S MOST ADMIRED COMPANIES

TOP 25 MOST REPUTABLE COMPANIES IN THE U.S.

100 BEST CORPORATE CITIZENS

50 MOST INNOVATIVE COMPANIES

TOP COMPANIES FOR DIVERSITY

100 SCORE ON HUMAN RIGHTS CAMPAIGN SINCE 2004

WE WORK LIKE THERE IS SOMETHING TO PROVE, BUT PERFORM LIKE WE’VE WON THE GAME


•Analytics Organizations are in Every Region in the World• North America; Europe, Middle East, & Africa (EMEA); Latin America; Asia

•In the North American Region (NAR):

•Global Product Organization• Engineering - Big Data Analytics & Competitive Insights

• Connected Appliances

• Competitive Intelligence• Analyzing competitors on the global scale

•Quality• Analyzing service incidence & reviews

921 November 2014

ANALYTICS ORGANIZATION OF WHIRLPOOL – PART 1


• Supply Chain• Forecasting product demands

• Sales• Analyzing & promoting proper selling techniques (i.e. – product profitability mix)

• Finance• Profitability & promotional effectiveness

• Database management

•Global Information Systems• Traditional IT Organization

• Developing Business Objects Application

•Marketing• Insights & Strategy

• Marketplace Strategy

• Digital Center of Excellence

1021 November 2014

ANALYTICS ORGANIZATION OF WHIRLPOOL – PART 2


•Reside in Marketing

• Service Marketing, Supply Chain, Finance,

&, especially, Sales

•Two Sections of our team:

• Consumer Insights

• Focus group testing of products; Consumer based research

• Marketplace Strategy

• Business Intelligence Application Managers (Oracle – S.M.A.R.T.)

• Analytics Managers

•Overall Goal: Promote Fact Based Decision Making

• How do we accomplish this:

• Data management, embedment, proliferation, self-servicing (e.g. – SMART)

• Analytics partnership & service with consumers

• Advanced analytic projects

1121 November 2014

MARKETPLACE INSIGHTS & STRATEGY TEAM

WHIRLPOOL CORPORATION CONFIDENTIAL 1221 November 2014

BI BUSINESS MODEL

Trusted Data

Enabling Insights & Foresights

Business AcumenRight Tool & People

• Merch & Product• Brand Marketing• Sales (Top 5 Accounts)• Business Critical

(case by case)


BUSINESS INTELLIGENCE APPLICATION

SMART

21 November 2014 13


FORECAST EXAMPLE

Non-Official

21 November 2014 14


•Autoregressive Integrated Moving Average (ARIMA)

• Basics:

• Only looks at one variable (i.e. – industry shipments)

• Estimates a trend of the data (moving average piece)

• Uses past history (autoregressive piece)

• Takes into account structural changes (integrated piece)

• Brings all of it together to form expectation

•Added Transfer Function Modeling

• Allows for outside variables to influence what you want to forecast

• Otherwise known as ARIMAX

•Three different forecasts were produced at three different confidence levels

• Individual products forecasted in three different levels (low, mid-range, high)

• Confidence level different for each product

• Levels chosen based on current 2014 YTD performance

• T5 Forecast produced by summing all product forecasts

1521 November 2014

METHODOLOGY USED

Source: Enders, Walters. Applied Econometric Time Series. Hoboken: John Wiley & Sons, Inc., 2004. Print.


•Forecasted Variable: AHAM Industry Shipments

• All T5 Products Forecasted

•Variables Used in Model:• Existing Home Sales

• Housing Starts

• Industrial Production Index – Monthly Measure for GDP

• Employment

• Mortgage Rates (30 yr)

• Whirlpool Point of Sale data (POS)

1621 November 2014

VARIABLES INCLUDED

Variables suggested by Joe Liotine

WHIRLPOOL CORPORATION CONFIDENTIAL 1721 November 2014

FORECAST

AHAM Shipments

**Y^Y % Chg = 2014 Forecasted Units over 2013 Actuals (2014 Forecast includes first months of actuals in 2014)****2014 YTD Y^Y % Chg = First six months of 2014 actuals over first six months of 2013 actuals**

Revised Model 1 2014 YTD 2014 2ndH 2014 FY 2015 2016

FL -1.2% 1.5% -0.1% 6.5% 3.8%

TL 7.9% 3.6% 6.0% 10.3% 9.1%

DR 2.9% 1.6% 2.4% 6.8% 5.9%

TM 0.7% -0.3% 0.3% 4.2% 1.2%

BM2 2.4% 1.7% 2.1% 6.0% 2.8%

BM3 12.2% 6.2% 9.4% 23.0% 15.3%

SS 0.1% 4.0% 1.7% 5.3% 4.3%

BW 8.8% 9.1% 9.0% 12.2% 10.8%

FS 7.3% 6.0% 6.7% 10.0% 9.0%

BI 7.6% 1.7% 4.9% 12.2% 10.5%

T5 5.4% 4.2% 4.9% 9.6% 7.9%


Actual Y^Y % Chg 2009 2010 2011 2012 2013 Average

Front Load -2.8% 0.0% -18.4% -19.7% 7.5% -6.7%

Top Load -6.5% 2.8% 2.4% 3.8% 13.4% 3.2%

Dryer -7.0% 1.0% -6.2% -5.5% 12.0% -1.1%

2DBM -35.6% 4.5% 10.1% -11.0% 0.4% -6.3%

French Door 9.8% 50.6% 6.5% -3.5% 24.8% 17.6%

Top Mount -6.8% 4.5% -3.7% -2.7% 3.4% -1.1%

Side-by-Side -17.5% 6.5% -15.3% -3.2% 3.7% -5.2%

DI/SI Range -11.6% 4.5% -4.1% 0.2% 10.2% -0.1%

Wall Oven -20.7% 9.2% -5.4% 1.3% 14.6% -0.2%

Free Standing Range -10.5% 4.0% -3.9% 0.1% 9.7% -0.1%

Dishwasher -9.7% 5.8% -3.1% 3.4% 11.6% 1.6%

T5 -9.0% 5.1% -4.5% -1.7% 10.4% 0.1%

1821 November 2014

ACTUAL Y^Y % CHANGE BY YEAR SINCE 2009

AHAM Shipments


Avg of Absolute Accuracies of

Forecast0+7 1+6 2+5 3+4 4+3 5+2 6+1 Avg

FL 9.6% 8.5% 9.7% 11.7% 8.0% 10.4% 3.2% 8.7%

TL 11.0% 14.4% 13.2% 2.6% 3.4% 8.8% 8.8% 8.9%

DR 8.7% 9.7% 10.2% 4.2% 4.4% 15.7% 7.2% 8.6%

TM 17.5% 15.1% 18.4% 10.2% 10.0% 2.5% 3.8% 11.1%

BM2 10.8% 10.4% 13.0% 7.3% 9.4% 5.0% 2.2% 8.3%

BM3 23.8% 19.0% 14.7% 16.9% 23.0% 8.9% 12.7% 17.0%

SS 15.4% 14.3% 16.8% 8.2% 9.7% 3.6% 7.0% 10.7%

BW 9.3% 11.1% 12.5% 6.1% 5.7% 4.9% 1.9% 7.4%

FS 17.6% 7.0% 4.2% 1.9% 1.7% 4.0% 6.7% 6.2%

BI 16.1% 7.6% 6.9% 4.3% 5.2% 5.6% 9.0% 7.8%

T5 8.4% 10.6% 11.6% 5.4% 4.7% 6.7% 4.8% 7.5%

1921 November 2014

AVERAGE ABSOLUTE ACCURACIES


Front Load Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Low 423 550 461 490 452 578 522 517 445 572 563 528

Mid-Range 423 550 461 490 452 578 522 517 445 584 583 548

High 423 550 461 490 452 578 522 517 445 584 583 548

Y^Y - Low 6.9% 5.1% 13.4% 5.4% -1.7% -1.0% 7.9% 2.3%

Y^Y – Mid 6.9% 5.1% 13.4% 5.4% -1.7% 4.3% 11.6% 6.0%

Y^Y – High 6.9% 5.1% 13.4% 5.4% -1.7% 4.3% 11.6% 6.0%

400

420

440

460

480

500

520

540

560

580

600

Q1 2012 Q2 2012 Q3 2013 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Low Mid-Range High

2021 November 2014

FRONT LOAD

AHAM ShipmentsUnits in Thousands

**Red highlights indicate forecasted numbers**


Top Load Q1 2012 Q2 2012 Q3 2013 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Low 1309 1352 1332 1393 1411 1618 1551 1527 1482 1681 1643 1670

Mid 1309 1352 1332 1393 1411 1618 1551 1527 1482 1701 1672 1699

High 1309 1352 1332 1393 1411 1618 1551 1527 1482 1729 1715 1742

Y^Y - Low 7.8% 19.7% 16.4% 9.6% 5.0% 3.9% 6.0% 9.4%

Y^Y - Mid 7.8% 19.7% 16.4% 9.6% 5.0% 5.1% 7.8% 11.3%

Y^Y - High 7.8% 19.7% 16.4% 9.6% 5.0% 6.9% 10.6% 14.1%

1300

1350

1400

1450

1500

1550

1600

1650

1700

1750

Q1 2012 Q2 2012 Q3 2013 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Low Mid High

2121 November 2014

TOP LOAD




Q1 2012 Q2 2012 Q3 2013 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Low 1378 1480 1399 1554 1506 1758 1611 1632 1524 1826 1710 1713

Mid 1378 1480 1399 1554 1506 1758 1611 1632 1524 1848 1743 1746

High 1378 1480 1399 1554 1506 1758 1611 1632 1524 1880 1791 1794

Y^Y - Low 9.3% 18.8% 15.1% 5.0% 1.1% 3.9% 6.2% 5.0%

Y^Y - Mid 9.3% 18.8% 15.1% 5.0% 1.1% 5.1% 8.2% 7.0%

Y^Y - High 9.3% 18.8% 15.1% 5.0% 1.1% 6.9% 11.2% 9.9%

1350

1450

1550

1650

1750

1850

Q1 2012 Q2 2012 Q3 2013 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Low Mid High

2221 November 2014

DRYER




PRESENTATION EXAMPLES

21 November 2014 23


161.98

47.72

174.98

143.87

68.26

163.11

0

20

40

60

80

100

120

140

160

180

200

4/1/2002 4/1/2003 4/1/2004 4/1/2005 4/1/2006 4/1/2007 4/1/2008 4/1/2009 4/1/2010 4/1/2011 4/1/2012 4/1/2013

(In

de

xed

to

10

0)

S&P 500 vs. Appliance Manufacturing Index

Manufacturers Index S&P 500

2421 November 2014

MANUFACTURING STOCK PERFORMS GREATER THAN THE MARKET DURING HOUSING GROWTH

MARKET EXPECTS APPLIANCE MANUFACTURERS’ TO PROFIT ABOVE THE MARKETSource: Yahoo! Finance

Manufactures: WHR, GE, Samsung, LG, & ElectroluxContact Justin Hanig for index creation methodology

Appliance Manufacturers Index > S&P 500

Appliance Manufacturers Index > S&P 500


58.0%

55.7%

56.1%

57.6%

54.0%

54.5%

55.0%

55.5%

56.0%

56.5%

57.0%

57.5%

58.0%

58.5%

Q1 Q2 Q3 Q4

Du

ress

% o

f P

urc

has

es

Duress Purchasing Seasonality

2521 November 2014

DURESS PURCHASING OCCURS MORE IN COLDER MONTHS THAN WARMER TIMES

REMODELING & NEW HOUSING PURCHASING OCCURS IN SPRING/SUMMER MONTHSSource: Stevenson TraQline

T5+MHC+Cooktops2004 - 2013


51.8%

43.3%

22.5%

25.2%25.7%

31.5%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4

Balance of Sale by Shopper Gender - T5+MHC+Cooktop

Couples Women only Men only

2621 November 2014

OVER HALF OF APPLIANCE PURCHASES ARE MADE BY SOLO SHOPPERS

THIS IS THE FASTEST GROWING GENDER SHOPPING SEGMENT151.4M MALES IN THE MARKETPLACE

Stevenson TraQline

Nearly 50% of solo shoppers were married


$283,734

$433,937

$1,264,065

$30,997

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

Avg

. In

com

e

Average Income Including Capital Gains

Top 10% Top 5% Top 1% Bottom 90%

2721 November 2014

INCOME GROWTH OCCURRING MAINLY IN HIGHER INCOME SEGMENTS

http://topincomes.g-mond.parisschoolofeconomics.eu/


28.1%

57.4%

14.5%

27.4%

58.2%

14.4%

25.3%

57.2%

17.4%

24.5%

57.4%

18.1%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Low End Mid Range High End

% o

f A

pp

lian

ce P

urc

has

es

Industry Growth at the High End

2010 2011 2012 2013

2821 November 2014

HIGH-END PRODUCT GROWTH SEEN IN APPLIANCES

OPPORTUNITIES AVAILABLE FOR CONTINUING TO DRIVE HIGH-END SALES

Source: Stevenson TraQlineT5+MHC+Cooktops


7.4%

Non-Polar Vortex States

5.4%

Polar Vortex States

21 November 2014 29

COLD TEMPERATURES AND HEAVY SNOW FALL COULD BE IMPEDING SALES GROWTH

POS GROWTH LESS IN STATES AFFECTED BY THE POLAR VORTEX

POS – T5+MHC+Cooktops

Polar Vortex States: ME, NH, VT, MA, RI, CT, NY, PA, OH, IN, IL, MI, WI, & MNNon-Polar Vortex States: AL, AR, AZ, CA, CO, FL, LA, MS, NM, NV, OK, TX, & UT


14.9

12.5

7.2

4.9

15.5

12

9.7

7.7

Sears Lowe's Best Buy HomeDepot

2013 Q3 2013 Q4

HHGREGGQ4 2013 DRAW

HHGREGGQ4 2013 CLOSE

WHERE HHGREGGWALKERS PURCHASED

11.0

HHGREGG WALKERS INCREASINGLY SHOPPING ATBEST BUY & HOME DEPOT

Stevenson Traqline

57.9

42.1

Walkers

Closed

- 0.3 pts Q^Q

30

+ 0.1 pts Q^Q


-5.0%

-13.5%

-11.5%

-6.5%

-0.2%

0.8%

11.7%

14.5%

28.7%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Y^Y % Change in Whirlpool POS

Industry hhgregg

3121 November 2014

Y^Y, MARKETPLACE POS GREW ~-5%

GROWTH WAS STRONGER IN THE 2ND HALF OF THE YEAR Sell-Through of Whirlpool Corp Brand Portfolio AHAM

Class T5+MHC+Cooktop Product Months Aligned to 445 Calendar

Marketplace

Retailer

Retailer

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Being a Good Middle Man