(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | |||
(Address of principal executive offices) | (Zip Code) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||
and | ||||||
Exhibit No. | Exhibit |
Exhibit 99.1 | |
Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
• | Very strong Q4 GAAP net earnings margin (5.4%, up 240 basis points) and ongoing (non-GAAP) EBIT margin(2) (7.2%, up 100 basis points), slightly ahead of our operational guidance. |
• | All-time record full-year GAAP and ongoing earnings per diluted share(1) of $18.45 and $16.00, respectively; ahead of our guidance. |
• | All regions profitable during Q4, with the North America region demonstrating sustained strong EBIT(3) margins of approximately 13%. |
• | Strong cash generation for full-year 2019; cash provided by operating activities of $1.2 billion and free cash flow(4) of $912 million. |
• | Solid outlook for 2020, forecasting earnings per diluted share of $14.80 to $15.80 on a GAAP basis and $16.00 to $17.00 on an ongoing(1) basis. Cash provided by operating activities in 2020 of $1.3 billion to $1.4 billion and free cash flow(4) of approximately $800 million to $900 million. |
• | GAAP net earnings and net earnings per share were $1.2 billion (5.8 percent of sales) and $18.45 in 2019 compared to $(183) million ((0.9) percent of sales) and $(2.72) in the prior year, driven by the gain on the sale of Embraco compressor business of approximately $511 million, partially offset by product warranty and liability expense of approximately $131 million. |
• | Ongoing EBIT(2) and ongoing earnings per diluted share(1) were $1.4 billion (6.9 percent of sales) and $16.00 in 2019, compared to $1.3 billion (6.3 percent of sales) and $15.16 in the prior year, primarily driven by strong product price/mix and reduced share count, partially offset by a higher effective tax rate. |
• | Full-year GAAP effective tax rate (ETR) of 22.8%, primarily driven by gain on sale of Embraco. |
• | Full-year adjusted ETR of 15.3%, near the low end of guidance, primarily due to a favorable European tax law change in December 2019 (~2.2 points tax rate improvement or ~$0.40 favorable earnings per share impact). |
• | Net sales were $20.4 billion compared to $21.0 billion in 2018, a decrease of 2.9 percent. Organic net sales (non-GAAP)(5) increased 1.6 percent. |
• | GAAP earnings per diluted share of $14.80 to $15.80 |
• | Ongoing earnings per diluted share(1) of $16.00 to $17.00 |
• | Effective tax rate of 20 to 25 percent |
• | Cash provided by operating activities of $1.3 billion to $1.4 billion |
• | Free cash flow(4) of $800 million to $900 million |
• | GAAP net earnings of $288 million (5.4 percent of sales), or $4.52 per diluted share, compared to $170 million (3.0 percent of sales), or $2.64 per diluted share, reported for the same prior-year period. |
• | Ongoing EBIT(2) was $389 million, or 7.2 percent of sales, compared to $348 million, or 6.2 percent of sales, in the same prior-year period. |
• | GAAP net earnings margin and ongoing EBIT(2) margin were favorably impacted by price/mix and focused cost discipline; GAAP net earnings also positively impacted by one-time real-estate transactions. |
• | Ongoing earnings per diluted share(1) were $4.91, compared to $4.75 in the same prior-year period. |
• | Net sales were $5.4 billion, compared to $5.7 billion in the same prior-year period, a decrease of 4.9 percent. Organic net sales (non-GAAP)(5) increased 1.2 percent. |
• | The Company's 2018 results include $17 million of EBIT(3) related to the Embraco compressor business. |
• | Strong sustained financial performance despite soft industry demand. |
• | Whirlpool North America reported fourth-quarter net sales of $3.1 billion, compared to $3.1 billion in the same prior-year period, a decrease of 0.3 percent. |
• | The region reported fourth-quarter EBIT(3) of $410 million, or 13.3 percent of sales, compared to EBIT of $376 million, or 12.2 percent of sales, in the same prior-year period. Fourth-quarter prior year ongoing EBIT(3) was $362 million, or 11.8 percent. During the quarter, the favorable impact of product price/mix and disciplined cost takeout were partially offset by lower fixed cost leverage and continued cost inflation. |
• | Profitable during the fourth-quarter, making it the second consecutive quarter of sequential EBIT(3) improvement. |
• | Whirlpool Europe, Middle East and Africa reported fourth-quarter net sales of $1.2 billion, compared to $1.2 billion in the same prior-year period, a decrease of 5.5 percent. Excluding the impact of currency, sales decreased 4.2 percent. |
• | The region reported fourth-quarter EBIT(3) of $11 million, or 0.9 percent of sales, compared to $(15) million, or (1.2) percent of sales, in the same prior-year period, driven by the favorable impact of cost takeout actions. |
• | Whirlpool Latin America reported fourth-quarter net sales of $782 million, compared to $990 million in the same prior-year period, a decrease of 21.0 percent. Organic net sales (non-GAAP)(5) increased 16.7 percent, despite industry softness in Mexico. |
• | The region reported fourth-quarter EBIT(3) of $42 million, or 5.3 percent of sales, compared to EBIT of $45 million, or 4.5 percent of sales, in the same prior-year period. Fourth-quarter prior year ongoing EBIT(3) was $59 million, or 5.9 percent. During the quarter, the favorable impact of higher unit volumes and lower raw material inflation was more than offset by unfavorable currency in Brazil and Argentina. The Latin America region's fourth-quarter 2018 results include $17 million of EBIT(3) related to the Embraco compressor business. |
• | India continues to deliver strong growth in a healthy demand environment. |
• | China brand transition investments and soft demand environment resulting in another quarter with operating losses in China. |
• | Whirlpool Asia reported fourth-quarter net sales of $356 million, compared to $372 million in the same prior-year period, a decrease of 4.3 percent. |
• | The region reported fourth-quarter EBIT(3) of $2 million, or 0.6 percent of sales, compared to $8 million, or 1.9 percent of sales, in the same prior-year period. During the quarter, the favorable impact of cost takeout initiatives and lower raw material inflation were more than offset by continued brand transition investments in China. |
Three Months Ended | Twelve Months Ended | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Net sales | $ | 5,382 | $ | 5,660 | $ | 20,419 | $ | 21,037 | |||||||
Expenses | |||||||||||||||
Cost of products sold | 4,334 | 4,710 | 16,886 | 17,500 | |||||||||||
Gross margin | 1,048 | 950 | 3,533 | 3,537 | |||||||||||
Selling, general and administrative | 562 | 593 | 2,142 | 2,189 | |||||||||||
Intangible amortization | 16 | 17 | 69 | 75 | |||||||||||
Restructuring costs | 46 | 31 | 188 | 247 | |||||||||||
Impairment of goodwill and other intangibles | — | — | — | 747 | |||||||||||
(Gain) loss on sale and disposal of businesses | — | — | (437 | ) | — | ||||||||||
Operating profit | 424 | 309 | 1,571 | 279 | |||||||||||
Other (income) expense | |||||||||||||||
Interest and sundry (income) expense | 54 | 2 | (168 | ) | 108 | ||||||||||
Interest expense | 39 | 51 | 187 | 192 | |||||||||||
Earnings (loss) before income taxes | 331 | 256 | 1,552 | (21 | ) | ||||||||||
Income tax expense | 43 | 86 | 354 | 138 | |||||||||||
Net earnings (loss) | 288 | 170 | 1,198 | (159 | ) | ||||||||||
Less: Net earnings (loss) available to noncontrolling interests | — | — | 14 | 24 | |||||||||||
Net earnings (loss) available to Whirlpool | $ | 288 | $ | 170 | $ | 1,184 | $ | (183 | ) | ||||||
Per share of common stock | |||||||||||||||
Basic net earnings (loss) available to Whirlpool | $ | 4.56 | $ | 2.66 | $ | 18.60 | $ | (2.72 | ) | ||||||
Diluted net earnings (loss) available to Whirlpool | $ | 4.52 | $ | 2.64 | $ | 18.45 | $ | (2.72 | ) | ||||||
Weighted-average shares outstanding (in millions) | |||||||||||||||
Basic | 63.3 | 64.2 | 63.7 | 67.2 | |||||||||||
Diluted | 63.9 | 64.7 | 64.2 | 67.2 |
December 31, 2019 | December 31, 2018 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 1,952 | $ | 1,498 | |||
Accounts receivable, net of allowance of $132 and $136, respectively | 2,198 | 2,210 | |||||
Inventories | 2,438 | 2,533 | |||||
Prepaid and other current assets | 810 | 839 | |||||
Assets held for sale | — | 818 | |||||
Total current assets | 7,398 | 7,898 | |||||
Property, net of accumulated depreciation of $6,444 and $6,190, respectively | 3,301 | 3,414 | |||||
Right of use assets | 921 | — | |||||
Goodwill | 2,440 | 2,451 | |||||
Other intangibles, net of accumulated amortization of $593 and $527, respectively | 2,225 | 2,296 | |||||
Deferred income taxes | 2,238 | 1,989 | |||||
Other noncurrent assets | 358 | 299 | |||||
Total assets | $ | 18,881 | $ | 18,347 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 4,547 | 4,487 | ||||
Accrued expenses | 652 | 690 | |||||
Accrued advertising and promotions | 949 | 827 | |||||
Employee compensation | 450 | 393 | |||||
Notes payable | 294 | 1,034 | |||||
Current maturities of long-term debt | 559 | 947 | |||||
Other current liabilities | 918 | 811 | |||||
Liabilities held for sale | — | 489 | |||||
Total current liabilities | 8,369 | 9,678 | |||||
Noncurrent liabilities | |||||||
Long-term debt | 4,140 | 4,046 | |||||
Pension benefits | 542 | 637 | |||||
Postretirement benefits | 322 | 318 | |||||
Lease liabilities | 778 | — | |||||
Other noncurrent liabilities | 612 | 463 | |||||
Total noncurrent liabilities | 6,394 | 5,464 | |||||
Stockholders' equity | |||||||
Common stock, $1 par value, 250 million shares authorized, 112 million shares issued, and 63 million and 64 million shares outstanding, respectively | 112 | 112 | |||||
Additional paid-in capital | 2,806 | 2,768 | |||||
Retained earnings | 7,870 | 6,933 | |||||
Accumulated other comprehensive loss | (2,618 | ) | (2,695 | ) | |||
Treasury stock, 49 million and 48 million shares, respectively | (4,975 | ) | (4,827 | ) | |||
Total Whirlpool stockholders' equity | 3,195 | 2,291 | |||||
Noncontrolling interests | 923 | 914 | |||||
Total stockholders' equity | 4,118 | 3,205 | |||||
Total liabilities and stockholders' equity | $ | 18,881 | $ | 18,347 |
Twelve Months Ended | |||||||
2019 | 2018 | ||||||
(Unaudited) | |||||||
Operating activities | |||||||
Net earnings (loss) | $ | 1,198 | $ | (159 | ) | ||
Adjustments to reconcile net earnings (loss) to cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 587 | 645 | |||||
Impairment of goodwill and other intangibles | — | 747 | |||||
(Gain) loss on sale and disposal of businesses | (437 | ) | — | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (87 | ) | 79 | ||||
Inventories | (39 | ) | 73 | ||||
Accounts payable | 140 | 210 | |||||
Accrued advertising and promotions | 118 | 12 | |||||
Accrued expenses and current liabilities | 22 | 162 | |||||
Taxes deferred and payable, net | (116 | ) | (67 | ) | |||
Accrued pension and postretirement benefits | (81 | ) | (434 | ) | |||
Employee compensation | 106 | 44 | |||||
Other | (181 | ) | (83 | ) | |||
Cash provided by operating activities | 1,230 | 1,229 | |||||
Investing activities | |||||||
Capital expenditures | (532 | ) | (590 | ) | |||
Proceeds from sale of assets and business | 1,174 | 160 | |||||
Purchase of held-to-maturity securities | — | — | |||||
Proceeds from held-to-maturity securities | — | 60 | |||||
Investment in related businesses | — | (25 | ) | ||||
Other | (6 | ) | (4 | ) | |||
Cash provided by (used in) investing activities | 636 | (399 | ) | ||||
Financing activities | |||||||
Net proceeds from borrowings of long-term debt | 700 | 705 | |||||
Repayments of long-term debt | (949 | ) | (386 | ) | |||
Net proceeds (repayments) from short-term borrowings | (723 | ) | 653 | ||||
Dividends paid | (305 | ) | (306 | ) | |||
Repurchase of common stock | (148 | ) | (1,153 | ) | |||
Purchase of noncontrolling interest shares | — | (41 | ) | ||||
Common stock issued | 8 | 17 | |||||
Other | (7 | ) | (7 | ) | |||
Cash used in financing activities | (1,424 | ) | (518 | ) | |||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (28 | ) | (67 | ) | |||
Increase in cash, cash equivalents and restricted cash | 414 | 245 | |||||
Cash, cash equivalents and restricted cash at beginning of year | 1,538 | 1,293 | |||||
Cash, cash equivalents and restricted cash at end of year | $ | 1,952 | $ | 1,538 |
Three Months Ended | |||
Earnings Before Interest & Taxes Reconciliation: | December 31, 2019 | ||
Net earnings (loss) available to Whirlpool | $ | 288 | |
Net earnings (loss) available to noncontrolling interests | — | ||
Income tax expense (benefit) | 43 | ||
Interest expense | 39 | ||
Earnings before interest & taxes(6) | $ | 370 | |
Net sales | $ | 5,382 | |
Net earnings margin | 5.4 | % |
Results classification | Earnings before interest & taxes(6) | Earnings per diluted share | |||||||
Reported measure | $ | 370 | $ | 4.52 | |||||
Restructuring costs(a) | Restructuring costs | 46 | 0.72 | ||||||
Sale leaseback, real estate and receivable adjustments(k) | Cost of products sold | (95 | ) | (1.49 | ) | ||||
Sale leaseback, real estate and receivable adjustments(k) | Selling, general and administrative | 9 | 0.14 | ||||||
Trade customer insolvency claim settlement(j) | Interest and sundry (income) expense | 59 | 0.93 | ||||||
Income tax impact | — | (0.02 | ) | ||||||
Normalized tax rate adjustment(b) | — | 0.11 | |||||||
Ongoing measure | $ | 389 | $ | 4.91 | |||||
Net sales | $ | 5,382 | |||||||
Ongoing EBIT margin | 7.2 | % |
Three Months Ended | |||
Earnings Before Interest & Taxes Reconciliation: | December 31, 2018 | ||
Net earnings (loss) available to Whirlpool | $ | 170 | |
Net earnings (loss) available to noncontrolling interests | — | ||
Income tax expense (benefit) | 86 | ||
Interest expense | 51 | ||
Earnings (loss) before interest & taxes(6) | $ | 307 | |
Net sales | $ | 5,660 | |
Net earnings margin | 3.0 | % |
Results classification | Earnings before interest & taxes(6) | Earnings per diluted share | |||||||
Reported measure | $ | 307 | $ | 2.64 | |||||
Restructuring costs(a) | Restructuring costs | 31 | 0.48 | ||||||
France antitrust settlement(h) | Interest and sundry (income) expense | (12 | ) | (0.18 | ) | ||||
Trade customer insolvency(e) | Selling, general and administrative | 1 | 0.01 | ||||||
Divestiture related transition costs(d) | Selling, general and administrative | 21 | 0.33 | ||||||
Income tax impact | — | 0.03 | |||||||
Normalized tax rate adjustment(b) | — | 1.44 | |||||||
Ongoing measure | $ | 348 | $ | 4.75 | |||||
Net sales | $ | 5,660 | |||||||
Ongoing EBIT margin | 6.2 | % |
Three Months Ended | |||||||||||||||
December 31, 2019 | |||||||||||||||
Segment earnings (loss) before interest and taxes | Restructuring costs(a) | Sale leaseback, real estate and receivable adjustments(k) | Trade customer insolvency claim settlement(j) | Ongoing segment earnings (loss) before interest and taxes | |||||||||||
North America | $ | 410 | $ | — | $ | — | $ | — | $ | 410 | |||||
EMEA | 11 | — | — | — | 11 | ||||||||||
Latin America | 42 | — | — | — | 42 | ||||||||||
Asia | 2 | — | — | — | 2 | ||||||||||
Other/Eliminations | (95 | ) | 46 | (86 | ) | 59 | (76 | ) | |||||||
Total Whirlpool Corporation | $ | 370 | $ | 46 | $ | (86 | ) | $ | 59 | $ | 389 |
Three Months Ended | ||||||||||||||||||
December 31, 2018 | ||||||||||||||||||
Segment earnings (loss) before interest and taxes | Restructuring expense(a) | France antitrust settlement(h) | Divestiture related transition costs(d) | Trade customer insolvency(e) | Ongoing segment earnings (loss) before interest and taxes | |||||||||||||
North America | $ | 376 | $ | — | $ | — | $ | — | $ | (13 | ) | $ | 362 | |||||
EMEA | (15 | ) | — | — | — | — | (15 | ) | ||||||||||
Latin America | 45 | — | — | — | 14 | 59 | ||||||||||||
Asia | 8 | — | — | — | — | 8 | ||||||||||||
Other/Eliminations | (107 | ) | 31 | (12 | ) | 21 | — | (66 | ) | |||||||||
Total Whirlpool Corporation | $ | 307 | $ | 31 | $ | (12 | ) | $ | 21 | $ | 1 | $ | 348 |
Twelve Months Ended | |||
Earnings Before Interest & Taxes Reconciliation: | December 31, 2019 | ||
Net earnings (loss) available to Whirlpool | $ | 1,184 | |
Net earnings (loss) available to noncontrolling interests | 14 | ||
Income tax expense (benefit) | 354 | ||
Interest expense | 187 | ||
Earnings before interest & taxes(6) | $ | 1,739 | |
Net sales | $ | 20,419 | |
Net earnings margin | 5.8 | % |
Twelve Months Ending | |||||||||
December 31, 2019 | |||||||||
Results classification | Earnings before interest & taxes(6) | Earnings per diluted share | |||||||
Reported measure* | $ | 1,739 | $ | 18.45 | |||||
Restructuring costs(a) | Restructuring costs | 188 | 2.93 | ||||||
Brazil indirect tax credit(c) | Interest and sundry (income) expense | (180 | ) | (2.80 | ) | ||||
(Gain) loss on sale and disposal of businesses(f) | (Gain) loss on sale and disposal of businesses | (437 | ) | (6.79 | ) | ||||
Product warranty and liability expense(g) | Cost of products sold | 126 | 1.96 | ||||||
Product warranty and liability expense(g) | Interest and sundry (income) expense | 5 | 0.08 | ||||||
Sale leaseback, real estate and receivable adjustments(k) | Cost of products sold | (95 | ) | (1.48 | ) | ||||
Sale leaseback, real estate and receivable adjustments(k) | Selling, general and administrative | 9 | 0.14 | ||||||
Trade customer insolvency claim settlement(j) | Interest and sundry (income) expense | 59 | 0.92 | ||||||
Income tax impact | — | 0.75 | |||||||
Normalized tax rate adjustment(b) | — | 1.84 | |||||||
Ongoing measure | $ | 1,414 | $ | 16.00 | |||||
Net sales | $ | 20,419 | |||||||
Ongoing EBIT margin | 6.9 | % |
Twelve Months Ended | |||
December 31, 2019 | |||
GAAP effective tax rate | 22.8 | % | |
Tax effect of non-GAAP adjustments to net earnings | (7.5 | )% | |
Non-GAAP adjusted tax rate | 15.3 | % |
Twelve Months Ended | |||
Earnings Before Interest & Taxes Reconciliation: | December 31, 2018 | ||
Net earnings (loss) available to Whirlpool | $ | (183 | ) |
Net earnings (loss) available to noncontrolling interests | 24 | ||
Income tax expense (benefit) | 138 | ||
Interest expense | 192 | ||
Earnings before interest & taxes(6) | $ | 171 | |
Net sales | $ | 21,037 | |
Net earnings margin | (0.9 | )% |
Results classification | Earnings before interest & taxes(6) | Earnings (loss) per diluted share | |||||||
Reported measure | $ | 171 | $ | (2.72 | ) | ||||
Restructuring costs(a) | Restructuring costs | 247 | 3.68 | ||||||
France antitrust settlement (h) | Interest and sundry (income) expense | 103 | 1.53 | ||||||
Impairment of goodwill and intangibles (i) | Impairment of goodwill and other intangibles | 747 | 11.11 | ||||||
Trade customer insolvency(e) | Selling, general and administrative | 30 | 0.45 | ||||||
Divestiture related transition costs(d) | Selling, general and administrative | 21 | 0.32 | ||||||
Income tax impact | — | (0.29 | ) | ||||||
Normalized tax rate adjustment(b) | — | 1.25 | |||||||
Share adjustment* | — | (0.17 | ) | ||||||
Ongoing measure | $ | 1,319 | $ | 15.16 | |||||
Net sales | $ | 21,037 | |||||||
Ongoing EBIT margin | 6.3 | % |
Twelve Months Ending | |||||
December 31, 2020 | |||||
Results classification | Earnings before interest & taxes(6) | Earnings per diluted share | |||
Reported measure* | $1,455 | $14.80 - $15.80 | |||
Restructuring costs(a) | Restructuring costs | 100 | 1.56 | ||
Income tax impact | — | (0.36) | |||
Ongoing measure | $1,555 | $16.00 - $17.00 |
Three Months Ended | |||||||||
2019 | 2018 | Change | |||||||
Net sales | $ | 5,382 | $ | 5,660 | (4.9 | )% | |||
Less: Embraco net sales | — | (288 | ) | ||||||
Add-Back: currency | 53 | — | |||||||
Organic net sales | $ | 5,435 | $ | 5,372 | 1.2 | % |
Twelve Months Ended | |||||||||
2019 | 2018 | Change | |||||||
Net sales | $ | 20,419 | $ | 21,037 | (2.9 | )% | |||
Less: Embraco net sales | (635 | ) | (1,135 | ) | |||||
Add-Back: currency | 430 | — | |||||||
Organic net sales | $ | 20,214 | $ | 19,902 | 1.6 | % |
Three Months Ended | |||||||||
2019 | 2018 | Change | |||||||
Net sales | $ | 782 | $ | 990 | (21.0 | )% | |||
Less: Embraco net sales | — | (288 | ) | ||||||
Add-Back: currency | 37 | — | |||||||
Organic net sales | $ | 819 | $ | 702 | 16.7 | % |
a. | RESTRUCTURING COSTS - In 2014, the Company completed the acquisition of Indesit S.p.A., which, due to its size, materially changed our European footprint. In 2018, these costs are primarily related to Indesit restructuring, an Embraco plant closure in Italy, and certain other unique restructuring events. In 2019, these costs are primarily related to actions that right-size our EMEA business and certain other unique restructuring events, including restructuring of the Naples, Italy manufacturing plant. |
b. | NORMALIZED TAX RATE ADJUSTMENT - Our 2019 normalized tax rate excludes the tax impact of the gain on sale of the Embraco business, a valuation allowance release and the Brazil indirect tax credit. The Company's 2018 normalized tax rate excludes the tax impact of impairment of goodwill and intangibles of $747 million, the France antitrust settlement charge of $103 million and the impact of U.S. tax reform of $95 million. |
c. | BRAZIL INDIRECT TAX CREDIT - During the first half of 2019, the Company received favorable, non-appealable decisions related to the recovery of certain taxes previously paid over gross sales. As a result, the Company recorded a gain in interest and sundry (income) expense during the first and second quarter of 2019 in the amount of $127 million and $53 million, respectively, in connection with these decisions. |
d. | DIVESTITURE RELATED TRANSITION COSTS - In the fourth quarter of 2018, the Company recognized transition costs of approximately $21 million associated with the sale of its Embraco compressor business. During the first and second quarter of 2019, the Company recognized additional transition costs of $6 million and $11 million, respectively. In the third quarter of 2019, the Company reclassified approximately $17 million of first half 2019 divestiture related transition costs into "(Gain) loss on sale and disposal of businesses" to fully reflect the net impact from the gain on the sale of the Embraco compressor business. |
e. | TRADE CUSTOMER INSOLVENCY - During the third quarter of 2018, the Company recognized bad debt expense related to trade customer insolvency of a U.S. retailer and a Brazilian retailer, in the amounts of approximately $17 million and $12 million, respectively. During the fourth quarter of 2018, the Company recognized an additional bad debt expense related to the Brazilian retailer in the amount of approximately $14 million, and reduced bad debt expense related to the U.S. retailer in the amount of approximately $13 million. |
f. | (GAIN) LOSS ON SALE AND DISPOSAL OF BUSINESSES - During the second quarter of 2019, the Company entered into an agreement to sell its South Africa operations. As a result, the Company recorded a charge of $35 million for the write-down of the assets of the disposal group to fair value and $33 million of cumulative foreign currency translation adjustments included in the carrying amount of the disposal group to calculate the impairment. The Company also incurred charges of approximately $11 million, primarily inventory liquidation costs, related to the exit of our domestic sales operations in Turkey. Total charges recorded in the second quarter of 2019 were approximately $79 million. During the third quarter of 2019, changes in working capital accounts and currency translation adjustments resulted in the Company reducing the amount of loss by approximately $5 million. |
g. | PRODUCT WARRANTY AND LIABILITY EXPENSE - In September 2015, the Company recorded a liability related to a corrective action affecting certain legacy Indesit products. During the second and third quarters of 2019, the Company incurred additional product warranty expense related to our previously disclosed legacy Indesit dryer corrective action campaign in the UK for approximately $12 million and $14 million, respectively. In the third quarter of 2019, the Company recorded a charge of approximately $105 million for estimated product warranty expense related to certain EMEA-produced washers for which the Company commenced a recall in January 2020. |
h. | FRANCE ANTITRUST SETTLEMENT - In 2013, the French Competition Authority ("FCA") commenced an investigation of appliance manufacturers and retailers, including Whirlpool and Indesit operations in France. With respect to the first part of the investigation, the Company agreed to a preliminary settlement with the FCA staff in the second quarter of 2018 and accrued $114 million. In the fourth quarter of 2018, the final settlement was approved by the FCA's college of commissioners in the amount of approximately $122 million, with approximately $19 million of the total settlement to be paid by the previous owner of Indesit to the Company. The Company paid $52 million in the first quarter of 2019 and the remainder in the second quarter of 2019. |
i. | IMPAIRMENT OF GOODWILL AND INTANGIBLES - During the second quarter of 2018, the Company performed a quantitative assessment of the EMEA region's goodwill and intangible assets for impairment. Based on a third-party valuation, the Company concluded that fair value of equity did not exceed its carrying value and therefore goodwill and intangible assets were impaired. The impact of this impairment was $168 million to intangible assets and $579 million to goodwill in the second quarter of 2018. |
j. | TRADE CUSTOMER INSOLVENCY CLAIM SETTLEMENT - In 2017, Alno AG and certain affiliated companies filed for insolvency protection in Germany. Bauknecht Hausgeräte GmbH, a subsidiary of the Company, was a long-standing supplier to Alno and certain of its affiliated companies. The Company was also a former indirect minority shareholder of Alno. In August 2018, the insolvency trustee asserted €174.5 million in clawback and related claims against Bauknecht. In January 2020, we entered into an agreement with the insolvency trustee to settle all potential claims that the insolvency trustee may have related to this matter, resulting in a one-time charge of €52.75 million ($59 million as of December 31, 2019). |
k. | SALE LEASEBACK, REAL ESTATE AND RECEIVABLE ADJUSTMENTS - In the fourth quarter of 2019, the Company sold certain owned properties, primarily warehouses, while agreeing to lease these same properties from the purchaser. As part of the sale, the Company recognized a pre-tax gain on sale of the group of properties of approximately $111M and a cash benefit of approximately $140M. In addition, the Company wrote-off the full loan receivable amount outstanding of approximately $18M related to a previous loan between the Company and a not-for-profit entity in connection with a community and economic development project. The Company also wrote-down the book value of certain real estate properties, recognizing a loss of approximately $7M. |
Twelve Months Ended | ||||||
December 31 | ||||||
(millions of dollars) | 2019 | 2018 | 2020 Outlook | |||
Cash provided by (used in) operating activities | $1,230 | $1,229 | $1,350 - $1,450 | |||
Capital expenditures, proceeds from sale of assets/businesses and change in restricted cash* | 682 | (376) | (550) | |||
Repayment of term loan | (1,000) | — | — | |||
Free cash flow | $912 | $853 | $800 - $900 | |||
Cash provided by (used in) investing activities** | $636 | $(399) | ||||
Cash provided by (used in) financing activities** | $(1,424) | $(518) |
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