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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ________________________________________________________
FORM 10-Q
  ________________________________________________________
☒
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
☐
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3932
whirlpoolcorplogoa26.jpg
WHIRLPOOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
38-1490038
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
 
2000 North M-63
 
 
Benton Harbor,
Michigan
 
49022-2692
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code (269) 923-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common stock, par value $1.00 per share
 
WHR
 
Chicago Stock Exchange
and
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No   ☐    
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
 
 
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No  ☒
Number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Class of common stock
 
Shares outstanding at July 17, 2020
Common stock, par value $1.00 per share
 
62,293,822


WHIRLPOOL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Three and Six Months Ended June 30, 2020
TABLE OF CONTENTS
 
 
PAGE
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 


FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Certain statements contained in this quarterly report, including those within the forward-looking perspective section within the Management's Discussion and Analysis, and other written and oral statements made from time to time by us or on our behalf do not relate strictly to historical or current facts and may contain forward-looking statements that reflect our current views with respect to future events and financial performance. As such, they are considered "forward-looking statements" which provide current expectations or forecasts of future events. Such statements can be identified by the use of terminology such as "may," "could," "will," "should," "possible," "plan," "predict," "forecast," "potential," "anticipate," "estimate," "expect," "project," "intend," "believe," "may impact," "on track," and similar words or expressions. Our forward-looking statements generally relate to our growth strategies, financial results, product development, and sales efforts. These forward-looking statements should be considered with the understanding that such statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.
This document contains forward-looking statements about Whirlpool Corporation and its consolidated subsidiaries ("Whirlpool") that speak only as of this date. Whirlpool disclaims any obligation to update these statements. Forward-looking statements in this document may include, but are not limited to, statements regarding expected earnings per share, cash flow, productivity and raw material prices, and the impact of COVID-19 pandemic on our operations and financial condition. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool's forward-looking statements. Among these factors are: (1) COVID-19 pandemic-related business disruptions and economic uncertainty; (2) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers, and the impact of the changing retail environment, including direct-to-consumer sales; (3) Whirlpool's ability to maintain or increase sales to significant trade customers and the ability of these trade customers to maintain or increase market share; (4) Whirlpool's ability to maintain its reputation and brand image; (5) the ability of Whirlpool to achieve its business plans, productivity improvements, and cost control objectives, and to leverage its global operating platform, and accelerate the rate of innovation; (6) Whirlpool's ability to obtain and protect intellectual property rights; (7) acquisition and investment-related risks, including risks associated with our past acquisitions, and risks associated with our increased presence in emerging markets; (8) risks related to our international operations, including changes in foreign regulations, regulatory compliance and disruptions arising from political, legal and economic instability; (9) information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; (10) product liability and product recall costs; (11) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (12) our ability to attract, develop and retain executives and other qualified employees; (13) the impact of labor relations; (14) fluctuations in the cost of key materials (including steel, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (15) Whirlpool's ability to manage foreign currency fluctuations; (16) impacts from goodwill impairment and related charges; (17) triggering events or circumstances impacting the carrying value of our long-lived assets; (18) inventory and other asset risk; (19) the uncertain global economy and changes in economic conditions which affect demand for our products; (20) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and postretirement benefit plans; (21) changes in LIBOR, or replacement of LIBOR with an alternative reference rate; (22) litigation, tax, and legal compliance risk and costs, especially if materially different from the amount we expect to incur or have accrued for, and any disruptions caused by the same; (23) the effects and costs of governmental investigations or related actions by third parties; and (24) changes in the legal and regulatory environment including environmental, health and safety regulations, and taxes and tariffs.
We undertake no obligation to update any forward-looking statement, and investors are advised to review disclosures in our filings with the SEC. It is not possible to foresee or identify all factors that could cause actual results to differ from expected or historic results. Therefore, investors should not consider the foregoing factors to be an exhaustive statement of all risks, uncertainties, or factors that could potentially cause actual results to differ from forward-looking statements.
Additional information concerning these and other factors can be found in "Risk Factors" in Part II, Item 1A of this report.    
Unless otherwise indicated, the terms "Whirlpool," "the Company," "we," "us," and "our" refer to Whirlpool Corporation and its consolidated subsidiaries.


2

Website Disclosure
We routinely post important information for investors on our website, whirlpoolcorp.com, in the "Investors" section. We also intend to update the Hot Topics Q&A portion of this webpage as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our webpage is not incorporated by reference into, and is not a part of, this document.


3

PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
 
PAGE
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 
 
PAGE
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.



4


WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE PERIODS ENDED JUNE 30
(Millions of dollars, except per share data)

 
Three Months Ended
 
Six Months Ended
 
2020
 
2019
 
2020
 
2019
Net sales
$
4,042

 
$
5,186

 
$
8,367

 
$
9,946

Expenses
 
 
 
 
 
 
 
Cost of products sold
3,411

 
4,254

 
7,036

 
8,202

Gross margin
631

 
932

 
1,331

 
1,744

Selling, general and administrative
421

 
584

 
841

 
1,089

Intangible amortization
15

 
18

 
30

 
36

Restructuring costs
118

 
60

 
123

 
86

(Gain) loss on sale and disposal of businesses
—

 
79

 
—

 
79

Operating profit
77

 
191

 
337

 
454

Other (income) expense
 
 
 
 

 

Interest and sundry (income) expense
(15
)
 
(63
)
 
(16
)
 
(193
)
Interest expense
49

 
52

 
92

 
103

Earnings before income taxes
43

 
202

 
261

 
544

Income tax expense (benefit)
18

 
130

 
89

 
(2
)
Net earnings
25

 
72

 
172

 
546

Less: Net earnings (loss) available to noncontrolling interests
(10
)
 
5

 
(15
)
 
8

Net earnings available to Whirlpool
$
35

 
$
67

 
$
187

 
$
538

Per share of common stock
 
 
 
 
 
 
 
Basic net earnings available to Whirlpool
$
0.55

 
$
1.04

 
$
2.98

 
$
8.42

Diluted net earnings available to Whirlpool
$
0.55

 
$
1.04

 
$
2.97

 
$
8.35

Dividends declared
$
1.20

 
$
1.20

 
$
2.40

 
$
2.35

Weighted-average shares outstanding (in millions)
 
 
 
 
 
 
 
Basic
62.4

 
63.8

 
62.6

 
63.9

Diluted
62.7

 
64.3

 
63.0

 
64.4

 
 
 
 
 
 
 
 
Comprehensive income
$
9

 
$
16

 
$
61

 
$
583

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


5

WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Millions of dollars, except share data)
 
(Unaudited)
 
 

June 30, 2020

December 31, 2019
Assets



Current assets



Cash and cash equivalents
$
2,546


$
1,952

Accounts receivable, net of allowance of $135 and $132, respectively
1,998


2,198

Inventories
2,129


2,438

Prepaid and other current assets
906


810

Total current assets
7,579


7,398

Property, net of accumulated depreciation of $6,497 and $6,444, respectively
3,132


3,301

Right of use assets
905

 
921

Goodwill
2,433


2,440

Other intangibles, net of accumulated amortization of $618 and $593, respectively
2,178


2,225

Deferred income taxes
2,172


2,238

Other noncurrent assets
277


358

Total assets
$
18,676


$
18,881

Liabilities and stockholders' equity



Current liabilities



Accounts payable
$
3,328


$
4,547

Accrued expenses
633


652

Accrued advertising and promotions
510


949

Employee compensation
343


450

Notes payable
1,712


294

Current maturities of long-term debt
298


559

Other current liabilities
901


918

Total current liabilities
7,725


8,369

Noncurrent liabilities
 


Long-term debt
4,886


4,140

Pension benefits
485


542

Postretirement benefits
279


322

Lease liabilities
741

 
778

Other noncurrent liabilities
635


612

Total noncurrent liabilities
7,026


6,394

Stockholders' equity



Common stock, $1 par value, 250 million shares authorized, 112 million shares issued, and 62 million and 63 million shares outstanding, respectively
112


112

Additional paid-in capital
2,822


2,806

Retained earnings
7,902


7,870

Accumulated other comprehensive loss
(2,731
)

(2,618
)
Treasury stock, 50 million and 49 million shares, respectively
(5,087
)

(4,975
)
Total Whirlpool stockholders' equity
3,018


3,195

Noncontrolling interests
907


923

Total stockholders' equity
3,925


4,118

Total liabilities and stockholders' equity
$
18,676


$
18,881


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


6

WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE PERIODS ENDED JUNE 30
(Millions of dollars)

Six Months Ended

2020

2019
Operating activities



Net earnings
$
172

 
$
546

Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
268

 
302

(Gain) loss on sale and disposal of businesses
—

 
79

Changes in assets and liabilities:
 
 
 
Accounts receivable
56

 
(251
)
Inventories
223

 
(574
)
Accounts payable
(982
)
 
(182
)
Accrued advertising and promotions
(414
)
 
(180
)
Accrued expenses and current liabilities
(135
)
 
(41
)
Taxes deferred and payable, net
33

 
(179
)
Accrued pension and postretirement benefits
(27
)
 
(39
)
Employee compensation
(70
)
 
7

Other
131

 
(309
)
Cash provided by (used in) operating activities
(745
)

(821
)
Investing activities



Capital expenditures
(155
)
 
(197
)
Proceeds from sale of assets and business
27

 
5

Other
—

 
(3
)
Cash provided by (used in) investing activities
(128
)

(195
)
Financing activities



Net proceeds from borrowings of long-term debt
1,029

 
697

Repayments of long-term debt
(568
)
 
(943
)
Net proceeds (repayments) from short-term borrowings
1,417

 
1,119

Dividends paid
(155
)
 
(149
)
Repurchase of common stock
(121
)
 
(50
)
Common stock issued
3

 
4

Cash provided by (used in) financing activities
1,605


678

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(138
)
 
9

Increase (decrease) in cash, cash equivalents and restricted cash
594


(329
)
Cash, cash equivalents and restricted cash at beginning of year
1,952


1,538

Cash, cash equivalents and restricted cash at end of year
$
2,546


$
1,209


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


7

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(1)    BASIS OF PRESENTATION
General Information
The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by U.S. GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2019.
Management believes that the accompanying Consolidated Condensed Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods.
We are required to make estimates and assumptions that affect the amounts reported in the Consolidated Condensed Financial Statements and accompanying Notes. Actual results could differ materially from those estimates.
We have eliminated all material intercompany transactions in our Consolidated Condensed Financial Statements. We do not consolidate the financial statements of any company in which we have an ownership interest of 50% or less, unless that company is deemed to be a variable interest entity ("VIE") of which we are the primary beneficiary. VIEs are consolidated when the company is the primary beneficiary of these entities and has the ability to directly impact the activities of these entities.
Risks and Uncertainties

COVID-19 continues to spread throughout the United States and other countries across the world, and the duration and severity of the effects are currently unknown. The pandemic has materially impacted and could in future periods materially impact our financial results. The Consolidated Condensed Financial Statements presented herein reflect estimates and assumptions made by management at June 30, 2020 and for the six months ended June 30, 2020.
Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived asset and indefinite-lived intangible asset valuation; inventory valuation; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; and the allowance for expected credit losses and bad debt. Events and changes in circumstances arising after July 23, 2020, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.
Goodwill and indefinite-lived intangible assets
Our Critical Accounting Policies and Estimates for goodwill and other indefinite-life intangibles are disclosed in Note 1 to the Consolidated Financial Statements and in Management's Discussion and Analysis of our annual report on Form 10-K for the fiscal year ended December 31, 2019.

We continue to monitor the significant global economic uncertainty as a result of COVID-19 to assess the outlook for demand for our products and the impact on our business and our overall financial performance. The goodwill in our EMEA reporting unit and our Indesit, Hotpoint* and Maytag trademarks continue to be at risk at June 30, 2020. The goodwill in our other reporting units or indefinite-lived intangible assets are not presently at risk for future impairment.

The potential impact of COVID-19 related demand disruptions, production impacts and supply constraint impacts on our operating results for the EMEA reporting unit in the short-term is uncertain, but we remain committed to the strategic actions necessary to realize the long-term forecasted EBIT margins and expect that the macroeconomic environment will recover in the medium to long-term. The potential negative demand effect on revenues for the Indesit and Hotpoint* trademarks and the Maytag trademark is also uncertain given the volatile environment, but we expect that demand and production levels will also recover.

As a result of our analysis, and in consideration of the totality of events and circumstances, there were no triggering events of impairment identified during the second quarter of 2020.



*Whirlpool ownership of the Hotpoint brand in EMEA and Asia Pacific regions is not affiliated with the Hotpoint brand sold in the Americas.


8



A lack of recovery or further deterioration in market conditions, a sustained trend of weaker than expected financial performance in EMEA or for our Indesit, Hotpoint* and Maytag trademarks or a lack of recovery or further decline in the Company’s market capitalization, among other factors, as a result of the COVID-19 pandemic or other unforeseen events could result in an impairment charge in future periods which could have a material adverse effect on our financial statements.
Income taxes
Under U.S. GAAP, the Company calculates its quarterly tax provision based on an estimated effective tax rate for the year and then adjusts this amount by certain discrete items each quarter. The changing and volatile macro-economic conditions connected with the COVID-19 pandemic may cause fluctuations in forecasted earnings before income taxes. As such, the Company's effective tax rate could be subject to volatility as forecasted earnings before income taxes are impacted by events which cannot be predicted. In addition, continued economic deterioration brought on by the pandemic may negatively impact the realizability of certain deferred tax assets.  
Other Accounting Matters
Synthetic lease arrangements
In the first quarter of 2020, we entered into a synthetic lease arrangement with a financial institution for non-core properties in the North America region. The term of these leases commenced in the first quarter of 2020 and will expire five years after commencement. The leases contain provisions for options to purchase, extend the original term for additional periods or return the property. We have assessed the reasonable certainty of these provisions to determine the appropriate lease term. These arrangements include a residual value guarantee that could potentially come due in future periods. The current obligation residual value guarantee is not material as of June 30, 2020.
We assessed the lease classification of the agreements and determined they were operating leases. These leases were measured using our incremental borrowing rate and are included in our right of use assets and lease liabilities in the Consolidated Condensed Balance Sheets for a nominal amount. Rental payments are calculated at the applicable LIBOR rate plus a margin and the annual lease payments are not material.
Adoption of New Accounting Standards
On January 1, 2020 we adopted Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The guidance in ASU 2016-13 creates a new impairment standard replacing the current "incurred loss" model. The incurred loss model required that for a loss to be impaired and recognized on the financial statements it must be probable that it has been incurred at the measurement date. The new standard utilizes an "expected credit loss" model also referred to as "the current expected credit loss" (CECL) model. Under CECL, there is no threshold for impairment loss recognition, but it instead reflects a current estimate of all expected credit losses. The adoption of this standard did not have a material impact to the Consolidated Condensed Financial Statements.
For additional information on the required disclosures related to the impact of adopting this standard, see Note 2 to the Consolidated Condensed Financial Statements.
We adopted the following standards, none of which had a material impact on our Consolidated Condensed Financial Statements:
Standard
 
Effective Date
2018-13
Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
January 1, 2020
2018-15
Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) Customer's Accounting for Implementation Costs Incurred In a Cloud Computing Arrangement That Is a Service Contract
January 1, 2020
2018-18
Collaborative Arrangements (Topic 808) - Clarifying the Interaction between Topic 808 and Topic 606
January 1, 2020

All other newly issued and effective accounting standards during 2020 were not relevant or material to the Company.


*Whirlpool ownership of the Hotpoint brand in EMEA and Asia Pacific regions is not affiliated with the Hotpoint brand sold in the Americas.


9


Accounting Pronouncements Issued But Not Yet Effective
In March 2020, the FASB issued Update 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The amendments in Update 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The new guidance provides the following optional expedients: simplify accounting analyses under current U.S. GAAP for contract modifications, simplify the assessment of hedge effectiveness, allow hedging relationships affected by reference rate reform to continue and allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform. The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An entity may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of adopting this guidance.
In December 2019, the FASB issued Update 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". The amendments in this Update affect entities within the scope of Topic 740, Income Taxes. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently evaluating the impact of adopting this guidance.
The FASB has issued the following relevant standards, which are not expected to have a material impact on our Consolidated Condensed Financial Statements:
Standard
 
Effective Date
2018-14
Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans
January 1, 2021

All other issued and not yet effective accounting standards are not relevant or material to the Company.
(2)    REVENUE RECOGNITION
Disaggregation of Revenue
The following table presents our disaggregated revenues by revenue source. We sell products within all product categories in each operating segment. For additional information on the disaggregated revenues by geographic regions, see Note 14 to the Consolidated Condensed Financial Statements.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Millions of dollars
 
2020
 
2019
 
2020
 
2019
Major product categories:
 
 
 
 
 
 
 
 
Laundry
 
$
1,071

 
$
1,492

 
$
2,401

 
$
2,975

Refrigeration
 
1,305

 
1,656

 
2,667

 
3,019

Cooking
 
909

 
1,075

 
1,852

 
2,119

Dishwashing
 
439

 
398

 
810

 
762

Total major product category net sales
 
$
3,725

 
$
4,621

 
$
7,731

 
$
8,875

Compressors(1)
 
—

 
323

 
—

 
635

Spare parts and warranties
 
206

 
180

 
434

 
371

Other
 
111

 
62

 
201

 
65

Total net sales
 
$
4,042

 
$
5,186

 
$
8,367

 
$
9,946


(1) 
Change in compressors compared to the prior year is due to the divestiture of the Embraco compressor business.
The impact to revenue related to prior period performance obligations was not material for the three and six months ended June 30, 2020.



10


Allowance for Expected Credit Losses and Bad Debt Expense

We estimate our expected credit losses primarily by using an aging methodology and establish customer-specific reserves for higher risk trade customers. Our expected credit losses are evaluated and controlled within each geographic region considering the unique credit risk specific to the country, marketplace and economic environment. We take into account past events, current conditions and reasonable and supportable forecasts in developing the reserve. The adoption of the new credit loss standard did not have a material impact on the Consolidated Condensed Financial Statements.
The following table summarizes our allowance for doubtful accounts by operating segment for the six months ended June 30, 2020.
Millions of dollars
December 31, 2019
Charged to Earnings
Write-offs
Foreign Currency
June 30, 2020
North America
$
4

$
4

$
(1
)
$
—

$
7

EMEA
83

5

(10
)
(3
)
75

Latin America
33

15

(7
)
(7
)
34

Asia
12

7

—

—

19

Consolidated
$
132

$
31

$
(18
)
$
(10
)
$
135


We also have an allowance on certain financing receivables that are recorded in prepaid and other current assets and other noncurrent assets on our Consolidated Condensed Balance Sheets. The allowance at June 30, 2020 and December 31, 2019 was approximately $41 million and $48 million, respectively. The amount charged to earnings and write-offs for the six months ended June 30, 2020 were not material.
(3)    CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported within our Consolidated Condensed Statements of Cash Flows:
 
June 30,
Millions of dollars
2020
 
2019
Cash and cash equivalents as presented in our Consolidated Condensed Balance Sheets
$
2,546

 
$
1,178

Restricted cash included in prepaid and other current assets (1)
—

 
25

Cash included in assets held for sale
—

 
6

Cash, cash equivalents and restricted cash as presented in our Consolidated Condensed Statements of Cash Flows
$
2,546

 
$
1,209

(1) 
Change in restricted cash reflects realization of foreign currency translation adjustments of $(1) million for the six months ended June 30, 2019 compared to the prior fiscal year end.
 
December 31,
Millions of dollars
2019
 
2018
Cash and cash equivalents as presented in our Consolidated Balance Sheets
$
1,952

 
$
1,498

Restricted cash included in prepaid and other current assets
—

 
40

Cash, cash equivalents and restricted cash as presented in our Consolidated Statements of Cash Flows
$
1,952

 
$
1,538


Restricted cash was used to fund capital expenditures and technical resources to enhance Whirlpool China's research and development and working capital, as required by the terms of the Whirlpool China (formerly Hefei Sanyo) acquisition. In 2019, we spent the remaining amount for these purposes resulting in restricted cash of $0 at December 31, 2019.


11


(4)    INVENTORIES
The following table summarizes our inventories at June 30, 2020 and December 31, 2019:
Millions of dollars

June 30, 2020

December 31, 2019
Finished products

$
1,638


$
1,979

Raw materials and work in process

619


602



2,257


2,581

Less: excess of FIFO cost over LIFO cost

(128
)

(143
)
Total inventories

$
2,129


$
2,438


LIFO inventories represented 40% and 43% of total inventories at June 30, 2020 and December 31, 2019, respectively.
(5)    PROPERTY, PLANT AND EQUIPMENT
The following table summarizes our property, plant and equipment at June 30, 2020 and December 31, 2019:
Millions of dollars

June 30, 2020

December 31, 2019
Land

$
89


$
97

Buildings

1,518


1,540

Machinery and equipment

8,022


8,108

Accumulated depreciation

(6,497
)

(6,444
)
Property, plant and equipment, net

$
3,132


$
3,301


During the six months ended June 30, 2020, we disposed of buildings, machinery and equipment with a net book value of $20 million. The net gain on the disposals were not material.
(6)    FINANCING ARRANGEMENTS
Debt Offering

On May 7, 2020, Whirlpool Corporation (the “Company”), completed its offering of $500 million in principal amount of 4.60% Senior Notes due 2050 (the “Notes”), in a public offering pursuant to a registration statement on Form S-3 (File No. 333-224381). The Notes were issued under an indenture (the “Indenture”), dated March 20, 2000, between the Company, as issuer, and U.S. Bank National Association (as successor to Citibank, N.A.), as trustee, as supplemented by a Certificate of Designated Officers establishing the terms and providing for the issuance of the Notes. The notes contain covenants that limit Whirlpool Corporation's ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The Company used the net proceeds from the sale of the Notes to repay a portion of the outstanding borrowings under the Company’s revolving credit facility, as amended and restated, dated as of August 6, 2019, among the Company, certain other borrowers, the lenders referred to therein, JPMorgan Chase Bank, N.A. as administrative agent and Citibank, N.A., as syndication agent.
On February 21, 2020, Whirlpool EMEA Finance S.à r.l., an indirect, wholly-owned finance subsidiary of Whirlpool Corporation, completed a bond offering consisting of €500 million (approximately $540 million at closing) in principal amount of 0.50% Senior Notes due in 2028 (the "Notes") in a public offering pursuant to a registration statement on Form S-3 (File No. 333-224381). The Notes were issued under an indenture, dated February 21, 2020, among Whirlpool EMEA Finance S.à r.l, as issuer, Whirlpool Corporation, as parent guarantor, and U.S. Bank National Association, as trustee. Whirlpool Corporation has fully and unconditionally guaranteed the Notes on a senior unsecured basis. The Notes contain covenants that limit Whirlpool Corporation's ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest.


12


On February 26, 2019, Whirlpool Corporation completed a bond offering consisting of $700 million in principal amount of 4.75% Senior Notes due in 2029. The notes contain covenants that limit Whirlpool Corporation's ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The notes are registered pursuant to a registration statement on Form S-3 (File No. 333-224381).
Debt Repayment
On March 12, 2020, €500 million (approximately $566 million at repayment) of 0.625% senior notes matured and were repaid.
On August 9, 2019, we repaid $1.0 billion pursuant to our April 23, 2018 Term Loan Agreement with Citibank, N.A., as Administrative Agent, and certain other financial institutions, representing full repayment of amounts borrowed under the term loan. As previously disclosed, we agreed to repay this term loan amount with the net cash proceeds received from the sale of our Embraco business unit to Nidec Corporation, which closed on July 1, 2019.
On March 1, 2019, $250 million of 2.40% senior notes matured and were repaid.
On February 27, 2019, we repaid €600 million (approximately $673 million) pursuant to our June 5, 2018 Term Loan Agreement with Wells Fargo Bank, National Association, as Administrative Agent, and certain other financial institutions (the "Whirlpool EMEA Finance Term Loan"), representing full repayment of amounts borrowed under the Whirlpool EMEA Finance Term Loan.
Credit Facilities
On April 27, 2020, Whirlpool Corporation entered into a revolving 364-Day Credit Agreement (the “364-Day Facility”) by and among the Company, the lenders referred to therein, and Citibank, N.A. as Administrative Agent. The 364-Day Facility provides aggregate borrowing capacity of $500 million, and has a termination date of April 26, 2021. The interest and fee rates payable with respect to the 364-Day Facility based on the Company’s current debt rating are as follows: (1) the Eurodollar Margin is 1.625%; (2) the spread over prime is 0.625%; and (3) the unused commitment fee is 0.400%, as of April 27, 2020. The 364-Day Facility contains customary covenants and warranties which are consistent with the Company’s $3.5 billion revolving credit facility, including, among other things, a debt to capitalization ratio of less than or equal to 0.65 as of the last day of each fiscal quarter, and a rolling twelve month interest coverage ratio required to be greater than or equal to 3.0 for each fiscal quarter. In addition, the covenants limit the Company’s ability to (or to permit any subsidiaries to), subject to various exceptions and limitations: (i) merge with other companies; (ii) create liens on its property; and (iii) incur debt at the subsidiary level.
On August 6, 2019, Whirlpool Corporation entered into a Fourth Amended and Restated Long-Term Credit Agreement (the "Amended Long-Term Facility", or "revolving credit facility") by and among the Company, certain other borrowers, the lenders referred to therein, JPMorgan Chase Bank, N.A. as Administrative Agent, and Citibank, N.A., as Syndication Agent. The Amended Long-Term Facility provides aggregate borrowing capacity of $3.5 billion, an increase of $500 million from the Company's prior amended and restated credit agreement. The Amended Long-Term Facility has a maturity date of August 6, 2024, unless earlier terminated. On March 13, 2020 we initiated a borrowing of approximately $2.2 billion under this agreement and for which a portion of the proceeds from the borrowing were used to fund commercial paper repayment. The interest and fee rates payable with respect to the Amended Long-Term Facility based on our current debt rating are as follows: (1) the spread over EURIBOR is 1.125%; (2) the spread over prime is 0.125%; and (3) the ticking fee is 0.100%. The Amended Long-Term Facility contains customary covenants and warranties including, among other things, a debt to capitalization ratio of less than or equal to 0.65 as of the last day of each fiscal quarter, and a rolling twelve month interest coverage ratio required to be greater than or equal to 3.0 for each fiscal quarter. In addition, the covenants limit our ability to (or to permit any subsidiaries to), subject to various exceptions and limitations: (i) merge with other companies; (ii) create liens on our property; (iii) incur debt at the subsidiary level. We are in compliance with both our debt to capitalization ratio and interest coverage ratio under the revolving credit facilities as of June 30, 2020.
In addition to the committed $3.5 billion Amended Long-Term Facility and the $500 million 364-Day Credit Agreement, we have committed credit facilities in Brazil and India. The committed credit facilities in Brazil and India provide borrowings up to 1 billion Brazilian reais and 1 billion Indian rupees (totaling approximately $196 million at June 30, 2020 and $262 million at December 31, 2019), maturing through 2022. On August 5, 2019 we terminated a €250 million


13


European revolving credit facility that we entered into in July 2015. The termination of this facility did not have a material impact on our Consolidated Condensed Financial Statements.
Facility Borrowings
On March 13, 2020, we initiated a borrowing of approximately $2.2 billion under the Amended Long-Term Facility, for which a portion of the proceeds from the borrowing were used to fund commercial paper repayment. We repaid $500 million of this Amended Long-Term Facility borrowing with the proceeds from our May 2020 Notes offering. We repaid an additional $500 million of this Amended Long-Term Facility borrowing by drawing on the full amount of the 364-Day Facility.

As of June 30, 2020, we had aggregate borrowing capacity of approximately $2.5 billion on our committed credit facilities, consisting of $2.3 billion under the Amended Long-Term Facility and approximately $200 million under our committed credit facilities in Brazil and India.

Notes Payable
Notes payable, which consist of short-term borrowings payable to banks or commercial paper, are generally used to fund working capital requirements. The fair value of our notes payable approximates the carrying amount due to the short maturity of these obligations.
The following table summarizes the carrying value of notes payable at June 30, 2020 and December 31, 2019:
Millions of dollars
 
June 30, 2020
 
December 31, 2019
Commercial paper
 
$
—

 
$
274

Short-term borrowings due to banks
 
1,712

 
20

Total notes payable
 
$
1,712

 
$
294



Short-term borrowings due to banks include amounts outstanding under the Amended Long-Term Facility, which are expected to be repaid in the next twelve months.
Transfers and Servicing of Financial Assets
In an effort to manage economic and geographic trade customer risk, from time to time, the Company will transfer, primarily without recourse, accounts receivable balances of certain customers to financial institutions resulting in a nominal impact recorded in interest and sundry (income) expense. These transactions are accounted for as sales of the receivables resulting in the receivables being de-recognized from the Consolidated Condensed Balance Sheets. These transfers primarily do not require continuing involvement from the Company, however certain arrangements include servicing of transferred receivables by Whirlpool. Outstanding accounts receivable transferred under arrangements where the Company continues to service the transferred asset were $206 million and $348 million as of June 30, 2020 and December 31, 2019, respectively.
(7)    COMMITMENTS AND CONTINGENCIES
Embraco Antitrust Matters
Beginning in February 2009, our former Embraco compressor business headquartered in Brazil ("Embraco") was notified of antitrust investigations of the global compressor industry by government authorities in various jurisdictions. Embraco resolved the government investigations and related claims in various jurisdictions and certain other claims remain pending.
Whirlpool has agreed to retain potential liabilities related to this matter following closing of the Embraco sale transaction. We continue to defend these actions. While it is currently not possible to reasonably estimate the aggregate amount of costs which we may incur in connection with these matters, such costs could have a material adverse effect on our financial statements in any particular reporting period.




14

BEFIEX Credits and Other Brazil Tax Matters
In previous years, our Brazilian operations earned tax credits under the Brazilian government's export incentive program (BEFIEX). These credits reduced Brazilian federal excise taxes on domestic sales.
In December 2013, the Brazilian government reinstituted the monetary adjustment index applicable to BEFIEX credits that existed prior to July 2009, when the Brazilian government required companies to apply a different monetary adjustment index to BEFIEX credits. Whether use of the reinstituted index should be given retroactive effect for the July 2009 to December 2013 period was subject to review by the Brazilian courts. In the third quarter of 2017, the Brazilian Supreme Court ruled that the reinstituted index should be given retroactive effect for the July 2009 to December 2013 period, which ruling was subsequently affirmed by the Brazilian Supreme Court, and is now final. Based on this ruling, we were entitled to recognize $72 million in additional credits, which were recognized in prior periods. At June 30, 2020, no BEFIEX credits remain to be monetized.
Our Brazilian operations have received tax assessments for income and social contribution taxes associated with certain monetized BEFIEX credits. We do not believe BEFIEX credits are subject to income or social contribution taxes. We believe these tax assessments are without merit and are vigorously defending our positions. We have not provided for income or social contribution taxes on these BEFIEX credits, and based on the opinions of tax and legal advisors, we have not accrued any amount related to these assessments at June 30, 2020. The total amount of outstanding tax assessments received for income and social contribution taxes relating to the BEFIEX credits, including interest and penalties, is approximately 2.0 billion Brazilian reais (approximately $360 million at June 30, 2020).
Relying on existing Brazilian legal precedent, in 2003 and 2004, we recognized tax credits in an aggregate amount of $26 million, adjusted for currency, on the purchase of raw materials used in production ("IPI tax credits"). The Brazilian tax authority subsequently challenged the recording of IPI tax credits. No such credits have been recognized since 2004. In 2009, we entered into a Brazilian government program ("IPI Amnesty") which provided extended payment terms and reduced penalties and interest to encourage tax payers to resolve this and certain other disputed tax credit amounts. As permitted by the program, we elected to settle certain debts through the use of other existing tax credits and recorded charges of approximately $34 million in 2009 associated with these matters. In July 2012, the Brazilian revenue authority notified us that a portion of our proposed settlement was rejected and we received tax assessments of 256 million Brazilian reais (approximately $47 million at June 30, 2020), reflecting interest and penalties to date. We believe these tax assessments are without merit and we are vigorously defending our position. The government's assessment in this case relies heavily on its arguments regarding taxability of BEFIEX credits for certain years, which we are disputing in one of the BEFIEX government assessment cases cited in the prior paragraph. Because the IPI Amnesty case is moving faster than the BEFIEX taxability case, we could be required to pay the IPI Amnesty assessment before obtaining a final decision in the BEFIEX taxability case.
We have received tax assessments from the Brazilian federal tax authorities relating to amounts allegedly due regarding unemployment/social security insurance taxes (PIS/COFINS) for tax credits recognized since 2007. These credits were recognized for inputs to certain manufacturing and other business processes. These assessments are being challenged at the administrative and judicial levels in Brazil. We estimate the possible losses related to these assessments to be approximately 294 million Brazilian reais (approximately $54 million at June 30, 2020). We believe these tax assessments are without merit and are vigorously defending our positions. Based on the opinion of our tax and legal advisors, we have not accrued any amount related to these assessments.
In addition to the IPI tax credit and PIS/COFINS inputs matters noted above, other assessments issued by the Brazilian tax authorities related to indirect and income tax matters, and other matters, are at various stages of review in numerous administrative and judicial proceedings. The amounts related to these assessments will continue to be increased by monetary adjustments at the Selic rate, which is the benchmark rate set by the Brazilian Central Bank. In accordance with our accounting policies, we routinely assess these matters and, when necessary, record our best estimate of a loss. We believe these tax assessments are without merit and are vigorously defending our positions.
Litigation is inherently unpredictable and the conclusion of these matters may take many years to ultimately resolve. We may experience additional delays in resolving these matters as a result of COVID-19-related administrative and judicial system temporary closures in Brazil. Amounts at issue in potential future litigation could increase as a result of interest and penalties in future periods. Accordingly, it is possible that an unfavorable outcome in these proceedings could have a material adverse effect on our financial statements in any particular reporting period.


15

ICMS Credits
We also filed legal actions in Brazil to recover certain social integration and social contribution taxes paid over gross sales including ICMS receipts, which is a form of Value Added Tax in Brazil. During 2017, we sold the rights to certain portions of this litigation to a third party for 90 million Brazilian reais (approximately $27 million at December 31, 2017). In the first quarter of 2019, we received a favorable decision in the largest of these ICMS legal actions. This decision is final and not subject to appeals. Based on the opinion of our tax and legal advisors, we recognized a gain of approximately $84 million, after related taxes and fees and based on exchange rates then in effect, during the first quarter of 2019 in connection with this decision. This amount reflects approximately $142 million in indirect tax credits ("credits") that we are entitled to monetize in future periods, offset by approximately $58 million in taxes and fees, which have been paid.
In the second quarter of 2019, we received favorable final, non-appealable decisions in two smaller ICMS legal actions. Based on the opinion of our tax and legal advisors, we recognized a gain of approximately $35 million, after related taxes and fees and based on exchange rates then in effect, during the second quarter of 2019 in connection with this decision. This amount reflects approximately $54 million in credits that we are entitled to monetize in future periods, offset by approximately $18 million in taxes, which have been paid, and $1 million in fees that we anticipate will be paid in 2020.
The ICMS credits and related fees are recorded in interest and sundry (income) expense in our Consolidated Condensed Statements of Comprehensive Income (Loss). The Brazilian tax authorities have sought clarification before the Brazilian Supreme Court (in a leading case involving another taxpayer) of certain matters, including the amount of these credits (i.e., the gross rate or net credit amount), and certain other matters that could affect the rights of Brazilian taxpayers regarding these credits, and a scheduled hearing has been delayed and it is not known when such hearing will be rescheduled. If the Brazilian tax authorities challenge our rights to these credits, we may become subject to new litigation related to credits already monetized and/or disallowance of further credit monetization. Based on the opinions of our tax and legal advisors, we have not accrued any amounts related to potential future litigation regarding these credits.
Competition Investigation
In 2013, the French Competition Authority ("FCA") commenced an investigation of appliance manufacturers and retailers in France, including Whirlpool and Indesit. The FCA investigation was split into two parts, and in December 2018, we finalized settlement with the FCA on the first part for a total fine of €102 million, with €56 million attributable to Whirlpool's France business and €46 million attributable to Indesit's France business. Payment of final amounts were made in 2019, including payment by Indesit's previous owners of €17 million out of escrow to the Company. The second part of the FCA investigation, which is expected to focus primarily on manufacturer interactions with retailers, is ongoing. The Company is cooperating with this investigation.
Although it is currently not possible to assess the impact, if any, that matters related to the FCA investigation may have on our financial statements, matters related to the FCA investigation could have a material adverse effect on our financial statements in any particular reporting period.
Trade Customer Insolvency
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 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 (approximately $59 million as of December 31, 2019), which was recorded in interest and sundry (income) expense in the Consolidated Statements of Income for the year ended December 31, 2019 and paid in 2020 as planned.
Other Litigation
See Note 13 for information on certain U.S. income tax litigation. In addition, we are currently defending against two lawsuits that have been certified for treatment as class actions in U.S. federal court, relating to two top-load washing machine models. In December 2019, the court in one of these lawsuits entered summary judgment in Whirlpool's favor. That ruling remains subject to appeal, and the other lawsuit is ongoing. We believe the lawsuits are without merit and are vigorously defending them. Given the preliminary stage of the proceedings, we cannot reasonably estimate a range


16

of loss, if any, at this time. The resolution of these matters could have a material adverse effect on our financial statements in any particular reporting period.
We are currently vigorously defending a number of other lawsuits related to the manufacture and sale of our products which include class action allegations, and may become involved in similar actions. These lawsuits allege claims which include negligence, breach of contract, breach of warranty, product liability and safety claims, false advertising, fraud, and violation of federal and state regulations, including consumer protection laws. In general, we do not have insurance coverage for class action lawsuits. We are also involved in various other legal actions arising in the normal course of business, for which insurance coverage may or may not be available depending on the nature of the action. We dispute the merits of these suits and actions, and intend to vigorously defend them. Management believes, based upon its current knowledge, after taking into consideration legal counsel's evaluation of such suits and actions, and after taking into account current litigation accruals, that the outcome of these matters currently pending against Whirlpool should not have a material adverse effect, if any, on our financial statements. We may experience additional delays in resolving these and other pending litigation matters as a result of COVID-19-related temporary court and administrative body closures and postponements.
Product Warranty and Legacy Product Corrective Action Reserves
Product warranty reserves are included in other current and other noncurrent liabilities in our Consolidated Condensed Balance Sheets. The following table summarizes the changes in total product warranty liability reserves for the periods presented:


Product Warranty
Millions of dollars

2020

2019
Balance at January 1

$
383


$
268

Issuances/accruals during the period

108


128

Settlements made during the period/other

(203
)

(143
)
Balance at June 30

$
288


$
253

 
 
 
 
 
Current portion

$
187


$
178

Non-current portion

101


75

Total

$
288


$
253



In the normal course of business, we engage in investigations of potential quality and safety issues. As part of our ongoing effort to deliver quality products to consumers, we are currently investigating certain potential quality and safety issues globally. As necessary, we undertake to effect repair or replacement of appliances in the event that an investigation leads to the conclusion that such action is warranted.

As part of this process, we investigated incident reports associated with a particular component in certain Indesit-designed horizontal axis washers produced in EMEA. In January 2020, we commenced a product recall in the UK and Ireland for these EMEA-produced washers, for which the recall is ongoing. In the third quarter of 2019, we accrued approximately $105 million in estimated product warranty expense related to this matter. This estimate is based on several assumptions which are inherently unpredictable and which we may need to materially revise in the future. For the six months ended June 30, 2020, settlements of approximately $50 million have been incurred related to this product recall.

For the twelve months ended December 31, 2019, we incurred approximately $26 million of additional product warranty expense related to our previously disclosed legacy Indesit dryer corrective action campaign in the UK. For the three and six months ended June 30, 2020, we incurred no additional product warranty expense related to this campaign. We continue to cooperate with the UK regulator, which continues to review the overall effectiveness of the modification program.
Guarantees
We have guarantee arrangements in a Brazilian subsidiary. For certain creditworthy customers, the subsidiary guarantees customer lines of credit at commercial banks to support purchases following its normal credit policies. If


17

a customer were to default on its line of credit with the bank, our subsidiary would be required to assume the line of credit and satisfy the obligation with the bank. At June 30, 2020 and December 31, 2019, the guaranteed amounts totaled 162 million Brazilian reais (approximately $30 million at June 30, 2020) and 577 million Brazilian reais (approximately $143 million at December 31, 2019), respectively. The fair value of these guarantees were nominal at June 30, 2020 and December 31, 2019. Our subsidiary insures against a significant portion of this credit risk for these guarantees, under normal operating conditions, through policies purchased from high-quality underwriters.
We provide guarantees of indebtedness and lines of credit for various consolidated subsidiaries. The maximum contractual amount of indebtedness and lines of credit available under these lines for consolidated subsidiaries totaled $3.4 billion at June 30, 2020 and $2.6 billion at December 31, 2019. Our total short-term outstanding bank indebtedness under guarantees was nominal at both June 30, 2020 and December 31, 2019.
(8)    PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The following table summarizes the components of net periodic pension cost and the cost of other postretirement benefits for the periods presented:


Three Months Ended June 30,


United States
Pension Benefits

Foreign
Pension Benefits

Other Postretirement
Benefits
Millions of dollars

2020

2019

2020

2019

2020

2019
Service cost

$
—


$
—


$
1


$
2


$
1


$
1

Interest cost

24


31


5


6


3


4

Expected return on plan assets

(41
)

(45
)

(7
)

(8
)

—


—

Amortization:












Actuarial loss

16


12


3


2


—


—

Prior service credit

—


—


—


—


(2
)

(3
)
Settlement and curtailment (gain) loss

—


—


—


—


(4
)

—

Net periodic benefit cost (credit)

$
(1
)

$
(2
)

$
2


$
2


$
(2
)

$
2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
United States
Pension Benefits
 
Foreign
Pension Benefits
 
Other Postretirement
Benefits
Millions of dollars
 
2020

2019

2020

2019

2020

2019
Service cost
 
$
1

 
$
1

 
$
3

 
$
3

 
$
3

 
$
3

Interest cost
 
49

 
62

 
9

 
12

 
6

 
8

Expected return on plan assets
 
(82
)
 
(89
)
 
(15
)
 
(15
)
 
—

 
—

Amortization:
 
 
 
 
 
 
 
 
 
 
 
 
Actuarial loss
 
31

 
24

 
6

 
4

 
—

 
—

Prior service credit
 
—

 
(1
)
 
—

 
—

 
(4
)
 
(5
)
Settlement and curtailment (gain) loss
 
—

 
—

 
—

 
1

 
(4
)
 
(7
)
Net periodic benefit cost (credit)
 
$
(1
)
 
$
(3
)
 
$
3

 
$
5

 
$
1

 
$
(1
)

The following table summarizes the net periodic cost recognized in operating profit and interest and sundry (income) expense for the periods presented:
 
 
Three Months Ended June 30,
 
 
United States
Pension Benefits
 
Foreign
Pension Benefits
 
Other Postretirement
Benefits
Millions of dollars
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
Operating profit (loss)
 
$
—

 
$
—

 
$
1

 
$
2

 
$
1

 
$
1

Interest and sundry (income) expense
 
(1
)
 
(2
)
 
1

 
—

 
(3
)
 
1

Net periodic benefit cost
 
$
(1
)
 
$
(2
)
 
$
2

 
$
2

 
$
(2
)
 
$
2




18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
United States
Pension Benefits
 
Foreign
Pension Benefits
 
Other Postretirement
Benefits
Millions of dollars
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
Operating profit (loss)
 
$
1

 
$
1

 
$
3

 
$
3

 
$
3

 
$
3

Interest and sundry (income) expense
 
(2
)
 
(4
)
 
—

 
2

 
(2
)
 
(4
)
Net periodic benefit cost
 
$
(1
)
 
$
(3
)
 
$
3

 
$
5

 
$
1

 
$
(1
)


401(k) Defined Contribution Plan

During March 2020, we announced that the company matching contributions for our 401(k) defined contribution plan, equal to up to 7% of participants' eligible compensation, covering substantially all U.S. employees will be contributed in company stock starting from May 2020.

Other Postretirement Benefit Plans
During the quarter, the Company announced changes to a postretirement medical benefit program for certain groups of active employees. These plan amendments are effective July 1, 2020 and reduce medical benefits for these pre-Medicare eligible and Medicare-eligible active employees who retire on or after July 1, 2020 and eliminate certain benefits effective January 1, 2024.
These plan amendments resulted in a reduction in the accumulated postretirement benefit obligation of approximately $45 million with a corresponding adjustment of $34 million in other comprehensive income, net of $11 million in deferred taxes as of June 2020. This amount is being amortized as a reduction of future net periodic cost over approximately 3.4 years, which represents the future remaining service period of eligible active employees.
For additional information, see Note 11 to the Consolidated Condensed Financial Statements.
Subsequently, on July 15, 2020, the Company announced additional changes to a postretirement medical benefit program for certain groups of retirees. These plan amendments are effective January 1, 2021 and reduce reimbursement amounts available under certain postretirement medical benefit programs and eliminate these benefits effective January 1, 2024 for these same retiree groups.
These additional plan amendments will result in a reduction in the accumulated postretirement benefit obligation of approximately $112 million with a corresponding adjustment of $84 million in other comprehensive income, net of $28 million in deferred taxes. This amount will be amortized as a reduction of future net periodic cost over approximately 3.4 years, which represents the future remaining service period of eligible active employees.

(9)    HEDGES AND DERIVATIVE FINANCIAL INSTRUMENTS
Derivative instruments are accounted for at fair value based on market rates. Derivatives where we elect hedge accounting are designated as either cash flow, fair value or net investment hedges. Derivatives that are not accounted for based on hedge accounting are marked to market through earnings. If the designated cash flow hedges are highly effective, the gains and losses are recorded in other comprehensive income (loss) and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. In the event it becomes probable the forecasted transaction to which a cash flow hedge relates will not occur, the derivative would be terminated and the amount in accumulated other comprehensive income (loss) would be recognized in earnings. The fair value of the hedge asset or liability is present in either other current assets/liabilities or other noncurrent assets/liabilities on the Consolidated Condensed Balance Sheets and in other within cash provided by (used in) operating activities in the Consolidated Condensed Statements of Cash Flows.
Using derivative instruments means assuming counterparty credit risk. Counterparty credit risk relates to the loss we could incur if a counterparty were to default on a derivative contract. We generally deal with investment grade counterparties and monitor the overall credit risk and exposure to individual counterparties. We do not anticipate nonperformance by any counterparties. The amount of counterparty credit exposure is limited to the unrealized gains, if any, on such derivative contracts. We do not require nor do we post collateral on such contracts.


19

Hedging Strategy
In the normal course of business, we manage risks relating to our ongoing business operations including those arising from changes in commodity prices, foreign exchange rates and interest rates. Fluctuations in these rates and prices can affect our operating results and financial condition. We use a variety of strategies, including the use of derivative instruments, to manage these risks. We do not enter into derivative financial instruments for trading or speculative purposes.
Commodity Price Risk
We enter into commodity derivative contracts on various commodities to manage the price risk associated with forecasted purchases of materials used in our manufacturing process. The objective of these hedges is to reduce the variability of cash flows associated with the forecasted purchase of commodities.
Foreign Currency and Interest Rate Risk
We incur expenses associated with the procurement and production of products in a limited number of countries, while we sell in the local currencies of a large number of countries. Our primary foreign currency exchange exposures result from cross-currency sales of products. As a result, we enter into foreign exchange contracts to hedge certain firm commitments and forecasted transactions to acquire products and services that are denominated in foreign currencies. We enter into certain undesignated non-functional currency asset and liability hedges that relate primarily to short-term payables, receivables, intercompany loans and dividends. When we hedge a foreign currency denominated payable or receivable with a derivative, the effect of changes in the foreign exchange rates are reflected currently in interest and sundry (income) expense for both the payable/receivable and the derivative. Therefore, as a result of the economic hedge, we do not elect hedge accounting.
We also enter into hedges to mitigate currency risk primarily related to forecasted foreign currency denominated expenditures, intercompany financing agreements and royalty agreements and designate them as cash flow hedges. Gains and losses on derivatives designated as cash flow hedges, to the extent they are included in the assessment of effectiveness, are recorded in other comprehensive income (loss) and subsequently reclassified to earnings to offset the impact of the hedged items when they occur.
We may enter into cross-currency interest rate swaps to manage our exposure relating to cross-currency debt. Notional amount of outstanding cross-currency interest rate swap agreements was $1,275 million at June 30, 2020 and December 31, 2019.
We may enter into interest rate swap agreements to manage interest rate risk exposure. Our interest rate swap agreements, if any, effectively modify our exposure to interest rate risk, primarily through converting certain floating rate debt to a fixed rate basis, and certain fixed rate debt to a floating rate basis. These agreements involve either the receipt or payment of floating rate amounts in exchange for fixed rate interest payments or receipts, respectively, over the life of the agreements without an exchange of the underlying principal amounts. We may enter into swap rate lock agreements to effectively reduce our exposure to interest rate risk by locking in interest rates on probable long-term debt issuances. There was a notional amount of $300 million of outstanding interest rate swap agreements at June 30, 2020 and December 31, 2019.
Net Investment Hedging
The following table summarizes our foreign currency denominated debt and foreign exchange forwards/options designated as net investment hedges at June 30, 2020 and December 31, 2019:
 
 
Notional (Local)
 
Notional (USD)
 
Current Maturity
Instrument
 
2020
 
2019
 
2020
 
2019
 
Senior note - 0.625%
 
€
—

 
€
500

 
$
—

 
$
569

 
March 2020
Foreign exchange forwards/options
 
MXN
7,200

 
MXN
7,200

 
$
312

 
$
382

 
August 2022

For instruments that are designated and qualify as a net investment hedge, the effective portion of the instruments' gain or loss is reported as a component of other comprehensive income (loss) and recorded in accumulated other comprehensive loss. The gain or loss will be subsequently reclassified into net earnings when the hedged net investment is either sold or substantially liquidated. The remaining change in fair value of the hedge instruments represents the ineffective portion, which is immediately recognized in interest and sundry (income) expense on our Consolidated


20

Condensed Statements of Comprehensive Income. As of June 30, 2020 and December 31, 2019, there was no ineffectiveness on hedges designated as net investment hedges. Due to the volatility in the macroeconomic environment caused by the COVID-19 pandemic, we have evaluated and dedesignated a nominal amount of certain foreign exchange cash flow hedges in the first quarter of 2020. No amount was dedesignated during the three months ended June 30, 2020.
The following table summarizes our outstanding derivative contracts and their effects in our Consolidated Condensed Balance Sheets at June 30, 2020 and December 31, 2019:
 

 

Fair Value of



 


Notional Amount

Hedge Assets

Hedge Liabilities

Maximum Term (Months)
Millions of dollars

2020
 
2019

2020
 
2019

2020
 
2019


2020
 
2019
Derivatives accounted for as hedges(1)


















Commodity swaps/options

$
235

 
$
174

 
$
7

 
$
4

 
$
24

 
$
10

 
(CF)
 
36
 
21
Foreign exchange forwards/options

2,962

 
3,177

 
132

 
94

 
10

 
84

 
(CF/NI)
 
140
 
32
Cross-currency swaps
 
1,275

 
1,275

 
90

 
25

 
—

 
23

 
(CF)
 
104
 
110
Interest rate derivatives
 
300

 
300

 
—

 
6

 
60

 
—

 
(CF)
 
59
 
65
Total derivatives accounted for as hedges







$
229


$
129


$
94


$
117







Derivatives not accounted for as hedges


















Commodity swaps/options

1

 
1

 
—

 
—

 
—

 
—

 
N/A
 
1
 
7
Foreign exchange forwards/options(2)

$
3,719

 
$
3,182

 
$
41

 
$
15

 
$
41

 
$
22

 
N/A
 
15
 
12
Total derivatives not accounted for as hedges







41


15


41


22







Total derivatives





$
270


$
144


$
135


$
139
































Current





$
141

 
$
55

 
$
51

 
$
61







Noncurrent







129

 
89

 
84

 
78







Total derivatives





$
270


$
144


$
135


$
139








(1) 
Derivatives accounted for as hedges are considered either cash flow (CF) or net investment (NI) hedges.
(2) 
Foreign exchange forwards/options have increased due to hedging of a future intercompany loan.




21

The following tables summarize the effects of derivative instruments and foreign currency debt designated as net investment hedges in our Consolidated Condensed Statements of Comprehensive Income for the periods presented:
 
 
 
 
Three Months Ended June 30,
 
 
 
Gain (Loss)
Recognized in OCI
(Effective Portion ) (3)
Cash Flow Hedges - Millions of dollars
 
 
2020
 
2019
Commodity swaps/options
 
$
24

 
$
(22
)
Foreign exchange forwards/options
 
(10
)
 
(4
)
Cross-currency swaps
 
(25
)
 
—

Interest rate derivatives
 
5

 
(5
)
Net Investment Hedges
 
 
 
 
Foreign currency
 
(14
)
 
(20
)
 
 
(20
)
 
(51
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
 
Location of Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
 
Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
Cash Flow Hedges - Millions of dollars
 
 
2020
 
2019
Commodity swaps/options (4)
 
Cost of products sold
 
$
(10
)
 
$
(6
)
Foreign exchange forwards/options
 
Net sales
 
3

 
(1
)
Foreign exchange forwards/options
 
Cost of products sold
 
9

 
6

Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
1

 
(4
)
Cross-currency swaps
 
Interest and sundry (income) expense
 
(16
)
 
(8
)
Interest rate derivatives
 
Interest expense
 
—

 
3

 
 
 
 
(13
)
 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
 
Location of Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges
 
Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges
Derivatives not Accounted for as Hedges - Millions of dollars
 
 
2020
 
2019
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
$
(25
)
 
$
(35
)
(3) 
Change in gain (loss) recognized in OCI (effective portion) for the three months ended June 30, 2020 is primarily driven by currency fluctuations and declines in commodity prices and interest rates compared to the prior year. The tax impact of the cash flow hedges was $(4) million and $5 million for the three months ended June 30, 2020 and 2019, respectively. The tax impact of the net investment hedges was $7 million and $5 million for the three months ended June 30, 2020 and 2019, respectively.
(4) 
Cost for commodity swaps/options are recognized in cost of sales as products are sold.


22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
Gain (Loss)
Recognized in OCI
(Effective Portion)(4)
Cash Flow Hedges - Millions of dollars
 
 
 
 
 
2020
 
2019
Commodity swaps/options
 
$
(31
)
 
$
—

Foreign exchange
 
95

 
24

Cross-currency swaps
 
95

 
—

Interest rate derivatives
 
(66
)
 
(22
)
Net Investment Hedges
 
 
 
 
Foreign currency
 
53

 
(19
)
 
 
$
146

 
$
(17
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
Location of Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
 
Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
Cash Flow Hedges - Millions of dollars
 
 
2020
 
2019
Commodity swaps/options (3)
 
Cost of products sold
 
$
(17
)
 
$
(9
)
Foreign exchange forwards/options
 
Net sales
 
3

 
(2
)
Foreign exchange forwards/options
 
Cost of products sold
 
9

 
11

Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
(31
)
 
33

Cross-currency swaps
 
Interest and sundry (income) expense
 
11

 
—

Interest rate derivatives
 
Interest expense
 
—

 
4

 
 
 
 
$
(25
)
 
$
37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
Location of Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges
 
Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges (2)
Derivatives not Accounted for as Hedges - Millions of dollars
 
 
2020
 
2019
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
$
17

 
$
(6
)

(4) 
Change in gain (loss) recognized in OCI (effective portion) for the six months ended June 30, 2020 is primarily driven by currency fluctuations and declines in commodity prices and interest rates compared to the prior year. The tax impact of the cash flow hedges was $(27) million and $10 million for the six months ended June 30, 2020 and 2019, respectively. The tax impact of the net investment hedges was $(17) million and $6 million for the six months ended June 30, 2020 and 2019, respectively.

For cash flow hedges, the amount of ineffectiveness recognized in interest and sundry (income) expense was nominal for the periods ended June 30, 2020, and 2019. There were no hedges designated as fair value for the periods ended June 30, 2020, and 2019. The net amount of unrealized gain or loss on derivative instruments included in accumulated OCI related to contracts maturing and expected to be realized during the next twelve months is a gain of $76 million at June 30, 2020.
(10)    FAIR VALUE MEASUREMENTS
Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or liability. Assets and liabilities measured at fair value are based on a market valuation approach using prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. As a basis for considering such assumptions, a three-tiered fair value hierarchy is established, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets that are observable, either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


23

The following table summarizes the valuation of our assets and liabilities measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019 are as follows:






Fair Value
Millions of dollars

Total Cost Basis

Level 1(2)

Level 2

Total
Measured at fair value on a recurring basis:

2020
 
2019

2020
 
2019

2020

2019

2020
 
2019
Short-term investments (1)

$
2,027


$
1,308


$
1,413


$
398


$
614


$
910


$
2,027


$
1,308

Net derivative contracts

—


—


—


—


135


5


135


5

(1) 
Short-term investments are primarily comprised of money market funds and highly liquid, low risk investments with initial maturities less than 90 days.
(2) 
Increase in level 1 investments reflect invested proceeds from the credit facility borrowings.

South Africa Business Disposal

During the second quarter of 2019, we entered into an agreement to sell our South Africa business. At the time of the agreement we classified this disposal group as held for sale and recorded it at fair value because it was lower than the carrying amount. Fair value was estimated based on the cash purchase price (Level 2 input) and we recorded an impairment charge of $35 million for the write-down of the assets to the fair value of $5 million. During the third quarter of 2019, we completed the sale of our South Africa business and adjusted the loss on disposal based on the carrying amount at the closing date. The adjustment was not material to the Consolidated Condensed Financial Statements.

See Note 15 to the Consolidated Condensed Financial Statements for additional information.
Other Fair Value Measurements
The fair value of long-term debt (including current maturities) was $5.58 billion and $5.00 billion at June 30, 2020 and December 31, 2019, respectively, and was estimated using discounted cash flow analysis based on incremental borrowing rates for similar types of borrowing arrangements (Level 2 input).


24

(11)    STOCKHOLDERS' EQUITY
The following table summarizes the changes in stockholders' equity for the periods presented:
 
 
 
 
Whirlpool Stockholders' Equity
 
 
 
 
Total
 
Retained
Earnings
 
Accumulated Other
Comprehensive Income (Loss)
 
Treasury Stock/
Additional Paid-
in-Capital
 
Common
Stock
 
Non-
Controlling
Interests
Balances, December 31, 2019
 
$
4,118

 
$
7,870

 
$
(2,618
)
 
$
(2,169
)
 
$
112

 
$
923

Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
147

 
152

 
—

 
—

 
—

 
(5
)
Other comprehensive income
 
(95
)
 
—

 
(97
)
 
—

 
—

 
2

Comprehensive income
 
52

 
152

 
(97
)
 
—

 
—

 
(3
)
Stock issued (repurchased)
 
(115
)
 
—

 
—

 
(115
)
 
—

 
—

Dividends declared
 
(75
)
 
(75
)
 
—

 
—

 
—

 
—

Balances, March 31, 2020
 
3,980

 
7,947

 
(2,715
)
 
(2,284
)
 
112

 
920

Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
25

 
35

 
—

 
—

 
—

 
(10
)
Other comprehensive income
 
(16
)
 
—

 
(16
)
 
—

 
—

 
—

Comprehensive income
 
9

 
35

 
(16
)
 
—

 
—

 
(10
)
Stock issued (repurchased)
 
19

 
—

 
—

 
19

 
—

 
—

Dividends declared
 
(83
)
 
(80
)
 
—

 
—

 
—

 
(3
)
Balances, June 30, 2020
 
3,925

 
7,902

 
(2,731
)
 
(2,265
)
 
112

 
907

 
 
 
 
Whirlpool Stockholders' Equity
 
 
 
 
Total
 
Retained
Earnings
 
Accumulated Other
Comprehensive Income (Loss)
 
Treasury Stock/
Additional Paid-
in-Capital
 
Common
Stock
 
Non-
Controlling
Interests
Balances, December 31, 2018
 
$
3,205

 
$
6,933

 
$
(2,695
)
 
$
(2,059
)
 
$
112

 
$
914

Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
474

 
471

 
—

 
—

 
—

 
3

Other comprehensive income
 
93

 
—

 
93

 
—

 
—

 
—

Comprehensive income
 
567

 
471

 
93

 
—

 
—

 
3

Adjustment to beginning retained earnings (1)
 
61

 
61

 
—

 
—

 
—

 
—

Stock issued (repurchased)
 
(40
)
 
—

 
—

 
(40
)
 
—

 
—

Dividends declared
 
(74
)
 
(74
)
 
—

 
—

 
—

 
—

Balances, March 31, 2019
 
$
3,719

 
$
7,391

 
$
(2,602
)
 
$
(2,099
)
 
$
112

 
$
917

Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
72

 
67

 
—

 
—

 
—

 
5

Other comprehensive income
 
(56
)
 
—

 
(55
)
 
—

 
—

 
(1
)
Comprehensive income
 
16

 
67

 
(55
)
 
—

 
—

 
4

Stock issued (repurchased)
 
13

 
—

 
—

 
13

 
—

 
—

Dividends declared
 
(81
)
 
(78
)
 
—

 
—

 
—

 
(3
)
Balances, June 30, 2019
 
3,667

 
7,380

 
(2,657
)
 
(2,086
)
 
112

 
918

(1) 
Increase to beginning retained earnings is due to the adoption of ASU 2016-02 [increase of approximately $61 million (net of tax)].


25

Other Comprehensive Income (Loss)
The following table summarizes our other comprehensive income (loss) and related tax effects for the periods presented:
 
 
Three Months Ended June 30,
 
 
2020
 
2019
Millions of dollars
 
Pre-tax
Tax Effect
Net
 
Pre-tax
Tax Effect
Net
Currency translation adjustments (2)
 
$
(61
)
$
7

$
(54
)
 
$
(54
)
5

$
(49
)
Cash flow hedges
 
7

(3
)
4

 
(21
)
5

(16
)
Pension and other postretirement benefits plans
 
46

(12
)
34

 
11

(2
)
9

Other comprehensive income (loss)
 
(8
)
(8
)
(16
)
 
(64
)
8

(56
)
Less: Other comprehensive income (loss) available to noncontrolling interests
 
—

—

—

 
(1
)
—

(1
)
Other comprehensive income (loss) available to Whirlpool
 
$
(8
)
$
(8
)
$
(16
)
 
$
(63
)
$
8

$
(55
)
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
2020

2019
Millions of dollars
 
Pre-tax
Tax Effect
Net
 
Pre-tax
Tax Effect
Net
Currency translation adjustments(2)
 
$
(233
)
$
(17
)
$
(250
)
 
$
38

$
6

$
44

Cash flow hedges
 
118

(26
)
92

 
(35
)
10

(25
)
Pension and other postretirement benefits plans
 
62

(15
)
47

 
22

(4
)
18

Other comprehensive income (loss)
 
(53
)
(58
)
(111
)
 
25

12

37

Less: Other comprehensive income (loss) available to noncontrolling interests
 
2

—

2

 
(1
)
—

(1
)
Other comprehensive income (loss) available to Whirlpool
 
$
(55
)
$
(58
)
$
(113
)
 
$
26

$
12

$
38


(2) 
Currency translation adjustments includes net investment hedges.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
The following table provides the reclassification adjustments out of accumulated other comprehensive income (loss), by component, which was included in net earnings for the three and six months ended June 30, 2020:
 
 
Three Months Ended
 
Six Months Ended
 
 
Millions of dollars
 
(Gain) Loss Reclassified
 
(Gain) Loss Reclassified
 
Classification in Earnings
Pension and postretirement benefits, pre-tax
 
13

 
29

 
Interest and sundry (income) expense



26

Net Earnings per Share
Diluted net earnings per share of common stock include the dilutive effect of stock options and other share-based compensation plans. Basic and diluted net earnings per share of common stock for the periods presented were calculated as follows:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Millions of dollars and shares
 
2020

2019
 
2020
 
2019
Numerator for basic and diluted earnings per share - Net earnings (loss) available to Whirlpool
 
$
35

 
$
67

 
$
187

 
$
538

Denominator for basic earnings per share - weighted-average shares
 
62.4

 
63.8

 
62.6

 
63.9

Effect of dilutive securities - share-based compensation
 
0.3

 
0.5

 
0.4

 
0.5

Denominator for diluted earnings per share - adjusted weighted-average shares
 
62.7

 
64.3

 
63.0

 
64.4

Anti-dilutive stock options/awards excluded from earnings per share
 
2.3

 
1.5

 
2.1

 
1.5


Share Repurchase Program
On July 25, 2017, our Board of Directors authorized a share repurchase program of up to $2 billion. During the six months ended June 30, 2020, we repurchased 902,000 shares under this share repurchase program at an aggregate price of approximately $121 million, all of which were repurchased in the first quarter of 2020. At June 30, 2020, there were approximately $531 million in remaining funds authorized under this program.
Share repurchases are made from time to time on the open market as conditions warrant. Given the current level of uncertainty surrounding the COVID-19 pandemic, we have decided to temporarily suspend our share repurchase program to protect liquidity in the current environment. The program does not obligate us to repurchase any of our shares and it has no expiration date.
(12)    RESTRUCTURING CHARGES
We periodically take action to improve operating efficiencies, typically in connection with business acquisitions or changes in the economic environment. Our footprint and headcount reductions and organizational integration actions relate to discrete, unique restructuring events, primarily reflected in the following plans.
On June 26, 2020, the Company committed to a workforce reduction plan in the United States, as part of the Company’s continued cost reduction efforts. The workforce reduction plan includes a voluntary retirement program and involuntary severance actions which were effective as of the end of the second quarter of 2020.  

The Company expects the actions to be substantially complete in 2020. As such, the Company estimates that it will incur a total of approximately $95 million in employee termination costs, and expects substantially all of the costs to result in cash expenditures in 2020. Additionally, the Company has committed to other global fixed cost actions which did not have material impact in the second quarter of 2020.  
On May 31, 2019, we announced our intention to reconvert our Naples, Italy manufacturing plant and potentially sell the plant to a third party. On September 16, 2019, we entered into a preliminary agreement to sell the plant to a third-party purchaser and to support costs associated with the transition. In October 2019, we announced that, based on further discussions with unions and the Italian government, we will continue production at the Naples manufacturing plant in the near-term and resume negotiations with unions and the Italian government related to our exit of the plant. Our preliminary agreement to sell the plant to a third-party purchaser terminated in accordance with its terms in March 2020. We intend to cease production in the plant and exit the facility in 2020 as previously disclosed.
In connection with this action, we have incurred approximately $43 million in asset impairment costs, $12 million in other associated costs and $6 million in employee-related costs through June 30, 2020. As of June 30, 2020, we continue to expect estimated total costs of $135 million and cash expenditures of $87 million. We estimate that the remaining costs of approximately $74 million, including approximately $46 million in employee-related costs and approximately $28 million in other associated costs, will be substantially incurred in 2020. The Company also believes that substantially all of the $87 million in estimated cash expenditures will occur in 2020. We expect these actions to be substantially complete in 2020.


27

In 2018, we announced actions in EMEA to reduce fixed costs by $50 million. The initiatives primarily include headcount reductions throughout the EMEA region. Additionally, we exited domestic sales operations in Turkey. These actions were substantially complete as of March 31, 2020.
The following table contains a subset of our restructuring actions above for the six months ended June 30, 2020 and the total costs to date for each plan:
Millions of dollars
2020
Total
North America Fixed Cost Actions
$
88

$
88

EMEA Fixed Cost Actions
7

84

EMEA Naples Facility Closure
7

61

Other Global Fixed Cost Actions
7

7


The following table summarizes the changes to our restructuring liability during the six months ended June 30, 2020:
Millions of dollars
December 31, 2019
Charges to Earnings
Cash Paid
Non-Cash and Other
June 30, 2020
Employee termination costs
$
57

$
106

$
(34
)
$
—

$
129

Asset impairment costs
8

—

—

—

8

Other exit costs
12

17

(14
)
(1
)
14

Total
$
77

$
123

$
(48
)
$
(1
)
$
151


The following table summarizes the restructuring charges by operating segment for the period presented:
 
Six Months Ended
Millions of dollars
June 30, 2020
North America
$
70

EMEA
22

Latin America
5

Asia
7

Corporate / Other
19

Total
$
123




28

(13)    INCOME TAXES
Income tax expense was $18 million and $89 million for the three and six months ended June 30, 2020, respectively, compared to income tax expense (benefit) of $130 million and $(2) million in the same period of 2019. For the three months ended June 30, 2020, the decrease in tax expense from the prior period is due primarily to a decrease in valuation allowances, lower earnings and related tax expense, and impact of tax law changes in the prior year. For the six months ended June 30, 2020, the increase in tax expense from the prior period is due to valuation allowance releases in the prior period, partially offset by higher level of earnings and related tax expense.
The following table summarizes the difference between income tax expense (benefit) at the U.S. statutory rate of 21% and the income tax expense (benefit) at effective worldwide tax rates for the respective periods:


Three Months Ended June 30,

Six Months Ended June 30,
Millions of dollars

2020

2019

2020
 
2019
Earnings before income taxes

$
43


$
202


$
261


$
544










Income tax expense computed at United States statutory tax rate
 
9

 
42

 
55

 
114

Valuation allowances
 
5

 
39

 
6

 
(196
)
Audits and settlements
 
5

 
(13
)
 
17

 
(13
)
U.S. foreign income items, net of credits
 
(2
)
 
4

 
1

 
11

Changes in enacted tax rates
 
—

 
25

 
—

 
25

Other
 
1

 
33

 
10

 
57

Income tax expense (benefit) computed at effective worldwide tax rates

$
18


$
130


$
89


$
(2
)

At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year and the impact of discrete items, if any, and adjust the quarterly rate as necessary.
Valuation Allowances
We routinely review the future realization of deferred tax assets based on projected future reversal of taxable temporary differences, available tax planning strategies and projected future taxable income. During the first quarter of 2019, we completed a $700 million bond offering for which the proceeds were used to refinance and recapitalize various entities in the EMEA region. Based upon existing transfer pricing policies, these actions are projected to provide sufficient future taxable income to realize the deferred tax assets. These actions injected additional internal capital into certain EMEA entities to meet local country capitalization requirements, as well as repaid all outstanding borrowings under the Whirlpool EMEA Finance Term Loan. As a result, we reduced the valuation allowance by $235 million during the first quarter of 2019.
Other Income Tax Matters
During its examination of Whirlpool’s 2009 U.S. federal income tax return, the IRS asserted that income earned by a Luxembourg subsidiary via its Mexican branch should be recognized as income on its 2009 U.S. federal income tax return. The Company believed the proposed assessment was without merit and contested the matter in United States Tax Court (US Tax Court). Both Whirlpool and the IRS moved for partial summary judgment on this issue. On May 5, 2020, the US Tax Court granted the IRS’s motion for partial summary judgment and denied Whirlpool’s. The Company intends to appeal the US Tax Court decision to the United States Sixth Circuit Court of Appeals. The Company believes that it will be successful upon appeal and has not recorded any impact of the US Tax Court’s decision in its consolidated financial statements.


29

(14)    SEGMENT INFORMATION
Our reportable segments are based upon geographical region and are defined as North America, EMEA, Latin America and Asia. These regions also represent our operating segments. Each segment manufactures home appliances and related components, but serves strategically different marketplaces. The chief operating decision maker evaluates performance based on each segment's earnings (loss) before interest and taxes (EBIT), which we define as operating profit less interest and sundry (income) expense and excluding restructuring costs, asset impairment charges and certain other items that management believes are not indicative of the region's ongoing performance, if any. Total assets by segment are those assets directly associated with the respective operating activities. The "Other/Eliminations" column primarily includes corporate expenses, assets and eliminations, as well as restructuring costs, asset impairment charges and certain other items that management believes are not indicative of the region's ongoing performance, if any. Intersegment sales are eliminated within each region except compressor sales out of Latin America through June 30, 2019, which were included in Other/Eliminations.


30

The tables below summarize performance by operating segment for the periods presented:


Three Months Ended June 30,
 

OPERATING SEGMENTS


North
America

EMEA

Latin
America

Asia

Other / Eliminations
Total
Whirlpool
Net sales











2020

$
2,501


$
836


$
434


$
271


$
—

$
4,042

2019

2,858

 
1,032

 
888

 
430

 
(22
)
5,186

Intersegment sales

 
 
 
 
 
 
 
 
 
 
2020

$
47

 
$
18

 
$
264

 
$
95

 
$
(424
)
$
—

2019

45

 
22

 
342

 
87

 
(496
)
—

Depreciation and amortization

 
 
 
 
 
 
 
 
 
 
2020

$
43

 
$
43

 
$
15

 
$
16

 
$
16

$
133

2019

55

 
58

 
13

 
17

 
17

160

EBIT

 
 
 
 
 
 
 
 
 
 
2020

$
316

 
$
(66
)
 
$
11

 
$
(18
)
 
$
(151
)
$
92

2019

353

 
(16
)
 
56

 
15

 
(154
)
254

Total assets

 
 
 
 
 
 
 
 
 
 
June 30, 2020

$
7,318

 
$
10,407

 
$
3,643

 
$
2,316

 
$
(5,008
)
$
18,676

December 31, 2019

7,791

 
9,450

 
4,226

 
2,581

 
(5,167
)
18,881

Capital expenditures

 
 
 
 
 
 
 
 
 
 
2020

$
25

 
$
18

 
$
12

 
$
9

 
$
9

$
73

2019

43

 
17

 
21

 
19

 
12

112

 
 
 
 
 
 
 
 
 
 
 
 


Six Months Ended June 30,
 

OPERATING SEGMENTS


North America

EMEA

Latin America

Asia

Other / Eliminations
Total Whirlpool
Net sales











2020

$
5,041

 
$
1,715

 
$
1,052

 
$
559

 
$
—

$
8,367

2019

5,393

 
2,036

 
1,763

 
801

 
(47
)
9,946

Intersegment sales

 
 
 
 
 
 
 
 
 

2020

$
120

 
$
38

 
$
550

 
$
158

 
$
(866
)
$
—

2019

111

 
43

 
679

 
171

 
(1,004
)
—

Depreciation and amortization

 
 
 
 
 
 
 
 
 


2020

$
90

 
$
81

 
$
31

 
$
33

 
$
33

$
268

2019

104

 
101

 
31

 
34

 
32

302

EBIT

 
 
 
 
 
 
 
 
 

2020

$
619

 
$
(81
)
 
$
42

 
$
(34
)
 
$
(193
)
$
353

2019

665

 
(37
)
 
101

 
22

 
(104
)
647

Total assets

 
 
 
 
 
 
 
 
 


June 30, 2020

$
7,318

 
$
10,407

 
$
3,643

 
$
2,316

 
$
(5,008
)
$
18,676

December 31, 2019

7,791

 
9,450

 
4,226

 
2,581

 
(5,167
)
18,881

Capital expenditures

 
 
 
 
 
 
 
 
 

2020

$
53

 
$
32

 
$
26

 
$
23

 
$
21

$
155

2019

78

 
27

 
45

 
29

 
18

197

The following table summarizes the reconciling items in the Other/Eliminations column for total EBIT for the periods presented:


31

 
Three Months Ended June 30,
 
Six Months Ended June 30,
in millions
2020
2019
 
2020
2019
Items not allocated to segments:
 
 
 
 
 
Restructuring costs
$
(118
)
$
(60
)
 
$
(123
)
$
(86
)
Divestiture related transition costs
—

(11
)
 
—

(17
)
Brazil indirect tax credit
—

53

 
—

180

Legacy product warranty and liability expense
—

(12
)
 
—

(12
)
Loss on disposal of businesses
—

(79
)
 
—

(79
)
Corporate expenses and other
(33
)
(45
)
 
(70
)
(90
)
Total other/eliminations
$
(151
)
$
(154
)
 
$
(193
)
$
(104
)
A reconciliation of our segment information for total EBIT to the corresponding amounts in the Consolidated Condensed Statements of Comprehensive Income (Loss) is shown in the table below for the periods presented:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
in millions
 
2020
2019
 
2020
2019
Operating profit
 
$
77

$
191

 
$
337

$
454

Interest and sundry (income) expense
 
(15
)
(63
)
 
(16
)
(193
)
Total EBIT
 
$
92

$
254

 
$
353

$
647

Interest expense
 
49

52

 
92

103

Income tax expense
 
18

130

 
89

(2
)
Net earnings (loss)
 
$
25

$
72

 
$
172

$
546

Less: Net earnings available to noncontrolling interests
 
(10
)
5

 
(15
)
8

Net earnings (loss) available to Whirlpool
 
$
35

$
67

 
$
187

$
538


(15)    DIVESTITURES AND HELD FOR SALE
Embraco Sale Transaction

On April 23, 2018, our Board of Directors approved the sale of Embraco and we subsequently entered into an agreement to sell the compressor business for a cash purchase price of $1.08 billion, subject to customary adjustments including for indebtedness, cash and working capital at closing.

On July 1, 2019, we completed the sale of Embraco and received cash proceeds of $1.1 billion inclusive of anticipated cash on hand at the time of closing. With the proceeds from this transaction, we repaid the outstanding term loan amount of approximately $1 billion as required under the April 23, 2018 Term Loan Agreement with Citibank, N.A., as Administrative Agent.
 
In connection with the sale, we recorded a pre-tax gain, net of transaction and other costs, of $511 million ($350 million net of taxes) during the twelve months ended December 31, 2019. The gain calculation is subject to change based on finalization of the amounts for working capital and other customary post-closing adjustments.
Embraco was reported within our Latin America reportable segment and met the criteria for held for sale accounting through the closing date. The operations of Embraco did not meet the criteria to be presented as discontinued operations. The assets and liabilities of Embraco were de-consolidated as of the closing date and there are no remaining carrying amounts in the Consolidated Balance Sheets at December 31, 2019.
South Africa Business Disposal

On June 28, 2019, we entered into an agreement to sell our South Africa operations for a cash purchase price of $5 million, subject to customary adjustments at closing.



32

On September 5, 2019, we completed the sale of our South Africa operations. In connection with the sale, we finalized the loss on disposal of $63 million which is recorded in the year ended December 31, 2019. The loss includes a charge of $29 million for the write-down of the assets of the disposal group to fair value and $34 million of cumulative foreign currency translation adjustments included in the carrying amount of the disposal group to calculate the impairment.

The South Africa business was reported within our EMEA reportable segment and met the criteria for held for sale accounting through the closing date. The operations of South Africa did not meet the criteria to be presented as discontinued operations.
See Note 10 to the Consolidated Condensed Financial Statements for additional information.
Divestiture of Turkey Domestic Sales Operations
For the six months ended June 30, 2019, we incurred approximately $11 million of divestiture related costs, primarily inventory liquidation costs, related to the exit from our domestic sales operations in Turkey.
For additional information, see Note 12 to the Consolidated Condensed Financial Statements.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ABOUT WHIRLPOOL
Whirlpool Corporation ("Whirlpool"), the world’s leading kitchen and laundry appliance company, was incorporated in 1955 under the laws of Delaware and was founded in 1911. Whirlpool manufactures products in 13 countries and markets products in nearly every country around the world. We have received worldwide recognition for accomplishments in a variety of business and social efforts, including leadership, diversity, innovative product design, business ethics, social responsibility and community involvement. We conduct our business through four operating segments, which we define based on geography. Whirlpool's operating segments consist of North America, Europe, Middle East and Africa ("EMEA"), Latin America and Asia. Whirlpool had approximately $20 billion in annual sales and 77,000 employees in 2019. The world's leading kitchen and laundry appliance company claim is based on publicly reported annual product sales, parts, and support revenues for 2019.   
OVERVIEW
Whirlpool had second-quarter GAAP net earnings available to Whirlpool of $35 million (net earnings margin of 0.9%), or $0.55 per share, compared to GAAP net earnings available to Whirlpool of $67 million (net earnings margin of 1.3%), or $1.04 per share, in the same prior-year period.
Whirlpool delivered a resilient global performance with ongoing EBIT (non-GAAP) margin of 5.2%, compared to 7.0% in the same prior-year period, despite the significant impact of COVID-19 on global demand. The reduction in GAAP net earnings margin and ongoing EBIT margin were driven by continued COVID-19 disruptions, unfavorable product price/mix, the divestiture of the Embraco compressor business and unfavorable foreign currency. These results were partially offset by the favorable impacts of cost reduction initiatives.
As Whirlpool continues to assess the ongoing impact of COVID-19 on business results, we remain firmly committed to taking aggressive actions to address the health and safety of our employees and negative effects from demand disruptions and production impacts, including, but not limited to the following:
•
Executing business continuity actions focused on our employee health and safety, such as travel bans, remote work policies, line distancing in our factories and enhanced cleaning and hygiene in our facilities, among other measures.
•
Proactively taking actions to mitigate volume deleverage, including rapidly implementing cost reduction actions to reduce our cost footprint to provide additional operational flexibility during the crisis.
•
Implementing rapid liquidity preservation actions, reduction of supply flows into our manufacturing facilities, disciplined inventory management, and capital expenditure reductions.
•
Taking appropriate actions to provide incremental financial flexibility during the crisis and in these volatile financial markets.


33


We believe that these aggressive cost reduction and liquidity preservation actions serve to position Whirlpool appropriately and provide additional operating and financial flexibility to successfully navigate this uncertain environment.
RESULTS OF OPERATIONS
The following table summarizes the consolidated results of operations for the periods presented:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Consolidated - Millions of dollars, except per share data
2020

2019
 
Better/(Worse)
 
2020
 
2019
 
Better/(Worse)
Net sales
$
4,042

 
$
5,186

 
(22.1)%
 
$
8,367

 
$
9,946

 
(15.9)%
Gross margin
631

 
932

 
(32.4)
 
1,331

 
1,744

 
(23.7)
Selling, general and administrative
421

 
584

 
28.0
 
841

 
1,089

 
22.8
Restructuring costs
118

 
60

 
98.4
 
123

 
86

 
(43.9)
Interest and sundry (income) expense
(15
)
 
(63
)
 
(75.9)
 
(16
)
 
(193
)
 
(91.5)
Interest expense
49

 
52

 
5.3
 
92

 
103

 
11.9
Income tax expense (benefit)
18

 
130

 
86.3
 
89

 
(2
)
 
nm
Net earnings available to Whirlpool
$
35

 
$
67

 
(48.2)%
 
$
187

 
$
538

 
(65.2)%
Diluted net earnings available to Whirlpool per share
$
0.55

 
$
1.04

 
(46.9)%
 
$
2.97

 
$
8.35

 
(64.5)%
nm = not meaningful
Consolidated net sales decreased 22.1% and 15.9% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019. The decrease for the three and six months ended was primarily driven by volume decrease, unfavorable foreign currency impact, the divestiture of Embraco and unfavorable product price/mix. The volume decline was driven by the negative demand and production / supply disruption effect of COVID-19. Organic net sales, or net sales excluding the impact of foreign currency and Embraco, decreased 13.8% and 7.4% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019.
For additional information regarding non-GAAP financial measures including organic net sales and net sales excluding the impact of foreign currency, see the Non-GAAP Financial Measures section of this Management's Discussion and Analysis.
The consolidated gross margin percentage for the three and six months ended June 30, 2020 decreased to 15.6% and 15.9%, respectively, compared to the same periods in 2019, which reflects the unfavorable impacts of volume decrease, product price/mix, lower cost productivity driven primarily by lost fixed cost leverage and foreign currency, partially offset by the favorable impact of raw material deflation.
Our operating segments are based upon geographical region and are defined as North America, EMEA, Latin America and Asia. These regions also represent our reportable segments. The chief operating decision maker evaluates performance based on each segment's earnings (loss) before interest and taxes (EBIT), which we define as operating profit less interest and sundry (income) expense and excluding restructuring costs, asset impairment charges and certain other items that management believes are not indicative of the region's ongoing performance, if any. For additional information, see Note 14 to the Consolidated Condensed Financial Statements.
The following is a discussion of results for each of our operating segments. Each of our operating segments has been significantly impacted by COVID-19 in the areas of manufacturing operations such as a decrease in production levels resulting in production level below normal capacity. Excess capacity costs of approximately $30 million for the second quarter 2020 have been realized across our operating segments. Additionally, operating segments have been impacted by disruptions in supply chains, distribution channels, and demand, among other COVID-19 related impacts.





34

NORTH AMERICA
chart-7482ff15f98c584cba5.jpgchart-523f7df7b9fa56d6976.jpg
Net Sales
Net sales decreased 12.5% and 6.5% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019. The decrease for the three and six months ended June 30, 2020 was primarily driven by lower volumes and unfavorable product price/mix. Excluding the impact from foreign currency, net sales decreased 12.3% and 6.4% for the three and six months ended June 30, 2020, respectively, compared to the same period in 2019.

EBIT
EBIT decreased for the three and six months ended June 30, 2020 compared to the same period in 2019 primarily due to the unfavorable impact of lower volumes and product price/mix, partially offset by cost productivity and raw material deflation. EBIT margin was 12.6% and 12.3% for the three and six months ended June 30, 2020, respectively, compared to 12.4% and 12.3% for the same periods in 2019.
EMEA
chart-533d91ac8bbf502f897.jpgchart-c56dcc2f6dfd5680b2f.jpg
Net Sales

Net sales decreased 19.0% and 15.8% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019. The decrease for the three and six months ended June 30, 2020 was driven by lower volumes and foreign currency, partially offset by favorable product price/mix. Excluding the impact from foreign currency, net sales decreased 17% and 13.7% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019.

EBIT

EBIT decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019 primarily due to the unfavorable impact of lower volumes. EBIT margin was (7.9)% and (4.7)% for the three and six months ended June 30, 2020, respectively, compared to (1.6)% and (1.8)% for the same periods in 2019.






35

LATIN AMERICA
chart-7fa7375a12995f7f969.jpgchart-a073932f07135874b49.jpg
Net Sales
Net sales decreased 51.1% and 40.3% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019. The decrease for the three and six months ended June 30, 2020 was primarily driven by the divestiture of the Embraco compressor business, lower volumes, and the unfavorable impact of foreign currency. Excluding the impact from foreign currency and Embraco, net sales decreased 4.1% and increased 9.6% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019.

EBIT
EBIT decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019 primarily due to the divestiture of the Embraco compressor business, lower volumes and the unfavorable impact of foreign currency, partially offset by cost productivity. EBIT margin was 2.5% and 4.0% for the three and six months ended June 30, 2020, respectively, compared to 6.3% and 5.7% for the same periods in 2019.
 
ASIA
chart-e09b06843c0a5c6a934.jpgchart-18215fccd72a5ed2b17.jpg
Net Sales
Net sales decreased 37.1% and 30.2% for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019. The decrease for the three and six months ended June 30, 2020 was primarily driven by lower volumes and the unfavorable impact of foreign currency. Excluding the impact from foreign currency, net sales decreased 33.7% and 27.5% for the three and six months ended June 30, 2020, compared to the same periods in 2019.
EBIT
EBIT decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019 primarily due to unfavorable impact of lower volumes and product price/mix, partially offset by cost productivity. EBIT margin was (6.7)% and (6.1)% for the three and six months ended June 30, 2020, respectively, compared to 3.6% and 2.8% for the same periods in 2019.


36

Selling, General and Administrative
The following table summarizes selling, general and administrative expenses as a percentage of net sales by region for the periods presented:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Millions of dollars
 
2020
 
As a %
of Net Sales
 
2019
 
As a %
of Net Sales
 
2020
 
As a %
of Net Sales
 
2019
 
As a %
of Net Sales
North America
 
$
170

 
6.8
%
 
$
227

 
7.9
%
 
$
336

 
6.7
%
 
$
403

 
7.5
%
EMEA
 
105

 
12.6

 
126

 
12.2

 
201

 
11.7

 
250

 
12.3

Latin America
 
46

 
10.5

 
90

 
10.1

 
107

 
10.2

 
168

 
9.5

Asia
 
52

 
19.2

 
75

 
17.5

 
110

 
19.7

 
136

 
17.0

Corporate/other
 
48

 
—

 
66

 
—

 
87

 
—

 
132

 
—

Consolidated
 
$
421

 
10.4
%
 
$
584

 
11.3
%
 
$
841

 
10.1
%
 
$
1,089

 
11.0
%
Consolidated selling, general and administrative expenses for the three and six months ended June 30, 2020 decreased compared to the same periods in 2019 primarily due to the impact of cost reduction actions and the divestiture of the Embraco compressor business.
Restructuring
We incurred restructuring charges of $118 million and $123 million for the three and six months ended June 30, 2020, respectively, compared to $60 million and $86 million for the same periods in 2019. For the full year 2020, we expect to incur total restructuring charges of $260 million to $280 million, which includes the Company's original guidance of $100 million, the U.S. restructuring actions of $95 million and anticipated additional restructuring actions in 2020. 
For additional information, see Note 12 to the Consolidated Condensed Financial Statements.
Loss on Disposal of Businesses
We recorded a loss of $79 million for the three and six months ended June 30, 2019 related to charges on the sale of the South Africa business ($68 million) and costs associated with the exit of the Turkey domestic sales operations ($11 million).

For additional information, see Note 15 to the Consolidated Condensed Financial Statements.
Interest and Sundry (Income) Expense
Interest and sundry income decreased for the three and six months ended June 30, 2020 compared to the same periods in 2019. The decrease in interest and sundry income for the three and six months ended June 30, 2020 was primarily due to the prior year impact of the Brazil indirect tax credit recorded of $53 million and $180 million, respectively. These amounts reflect $54 million and $196 million of indirect tax credits, net of related fees. 
For additional information, see Note 7 to the Consolidated Condensed Financial Statements.
Pension and Other Postretirement Benefit Plans
During the quarter, the Company announced changes to a postretirement medical benefit program for certain groups of active employees. The total annualized net earnings impact of these plan amendments is approximately $22 million. The impact for the second quarter is not material to the Consolidated Condensed Financial Statements at June 30, 2020.
Subsequently, on July 15, 2020, the Company announced additional changes to a postretirement medical benefit program for certain groups of retirees. The total annualized net earnings impact of these plan amendments is approximately $35 million. Due to the announcement timing of these subsequent plan amendments, we have not recognized any amounts relating to these changes as of June 30, 2020.


37

For additional information, see Note 8 to the Consolidated Condensed Financial Statements.
Interest Expense
Interest expense for the three and six months ended June 30, 2020 decreased compared to the same periods in 2019 primarily due to lower average short-term debt balances.
Income Taxes
Income tax expense (benefit) was $18 million and $89 million for the three and six months ended June 30, 2020, respectively, compared to income tax expense (benefit) of $130 million and $(2) million in the same periods of 2019. For the three months ended June 30, 2020, the decrease in tax expense from the prior period is due primarily to a decrease in valuation allowances, lower earnings and related tax expense, and impact of tax law changes in the prior year. For the six months ended June 30, 2020, the increase in the effective tax rate from the prior period is due to valuation allowance releases in the prior period, partially offset by higher level of earnings and related tax expense.
For additional information, see Note 13 to the Consolidated Condensed Financial Statements.
Other Information
Goodwill and Indefinite-Lived Intangible Assets

Our Critical Accounting Policies and Estimates for goodwill and other indefinite-life intangibles are disclosed in Note 1 to the Consolidated Financial Statements and in Management's Discussion and Analysis of our annual report on Form 10-K for the fiscal year ended December 31, 2019.

We continue to monitor the significant global economic uncertainty as a result of COVID-19 to assess the outlook for demand for our products and the impact on our business and our overall financial performance. Our EMEA reporting unit and our Indesit, Hotpoint* and Maytag trademarks continue to be at risk and none of our other reporting units or indefinite-lived intangible assets are presently at risk for future impairment.
For additional information, see Note 1 to the Consolidated Condensed Financial Statements.
FINANCIAL CONDITION AND LIQUIDITY
Background
Our objective is to finance our business through operating cash flow and the appropriate mix of long-term and short-term debt. By diversifying the maturity structure, we avoid concentrations of debt, reducing liquidity risk. We have varying needs for short-term working capital financing as a result of the nature of our business. We regularly review our capital structure and liquidity priorities, which include funding the business through capital and engineering spending to support innovation and productivity initiatives, funding our pension plan and term debt liabilities, providing return to shareholders, and funding potential acquisitions.
Our short-term potential uses of liquidity include funding our business operations, ongoing capital spending, restructuring activities, payments of short and long-term debt and returns to shareholders. We currently have $298 million long-term debt maturing in the next twelve months.
We monitor the credit ratings and market indicators of credit risk of our lending, depository, derivative counterparty banks, and customers regularly, and take certain actions to manage credit risk. We diversify our deposits and investments in short-term cash equivalents to limit the concentration of exposure by counterparty.

COVID-19 pandemic

The COVID-19 pandemic has resulted in significant uncertainty in the macroeconomic environment and disruptions in global financial markets. We believe we have a strong financial position and the liquidity required to withstand economic uncertainty during this volatile period in consideration of the following:
•
Solid investment grade credit rating
*Whirlpool ownership of the Hotpoint brand in EMEA and Asia Pacific regions is not affiliated with the Hotpoint brand sold in the Americas.


38

•
No bond maturities for the remainder of 2020; $300 million due in June 2021
•
Ample buffers in our financial covenants to withstand additional debt or reduction to equity
•
$2.5 billion of cash and cash equivalents at June 30, 2020
•
$2.5 billion of remaining availability on our committed credit facilities
•
Completed $500 million 30-year senior notes offering in May 2020
•
Focused cost takeout including significant global restructuring actions
•
Strong working capital management

Cash and cash equivalents
The Company had cash and cash equivalents of approximately $2.5 billion at June 30, 2020, of which the majority was held by subsidiaries in foreign countries with the remainder held in the United States. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and expected future foreign investments. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable United States taxes (if any) and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with the repatriation of cash due to the complexity of its hypothetical calculation.
At June 30, 2020, we had cash or cash equivalents greater than 1% of our consolidated assets in the United States, China and Brazil which represented 7.7%, 1.8% and 1.1%, respectively. In addition, we did not have any third-party accounts receivable greater than 1% of our consolidated assets in any single country outside of the United States. We continue to monitor general financial instability and uncertainty globally.
Revolving credit facility and other committed credit facilities
The Company maintains a $3.5 billion revolving credit facility. On March 13, 2020, we initiated a borrowing of approximately $2.2 billion under the revolving credit facility, for which a portion of the proceeds from the borrowing were used to fund commercial paper repayment. We repaid $500 million of this revolving credit facility borrowing with the proceeds from our May 2020 Notes offering. We repaid an additional $500 million of this revolving credit facility borrowing by drawing on the full amount of our 364-Day Facility.
We were in compliance with both our debt to capitalization ratio and interest coverage ratio under the revolving credit facility as of June 30, 2020. We are closely monitoring our ability to meet these covenants in future periods and expect to continue to be in compliance.

At June 30, 2020, we had aggregate borrowing capacity of approximately $2.5 billion on our committed credit facilities, consisting of $2.3 billion under the Amended Long-Term Facility and  approximately $200 million under our committed credit facilities in Brazil and India.
Notes payable
Notes payable consists of short-term borrowings payable to banks and commercial paper, which are generally used to fund working capital requirements. At June 30, 2020, we have $1.7 billion of notes payable under the revolving credit facilities which is expected to be repaid in the next twelve months. For additional information, see Note 6 to the Consolidated Condensed Financial Statements.
Trade customers
We continue to review customer conditions globally. In light of the COVID-19 pandemic, there is a heightened risk of trade customer financial restructuring or insolvency situations and increases in our accounts receivable balances with these trade customers. While there was not a material effect from these events during the three months ended June 30, 2020, nor do we have immediate visibility into those situations materializing in the future, we continue to monitor these situations and take appropriate risk mitigation steps in light of the current environment.


39

At June 30, 2020, we had 272 million Brazilian reais (approximately $50 million at June 30, 2020) in short and long-term receivables due to us from Maquina de Vendas S.A. In 2018, as part of their extrajudicial recovery plan, we agreed to receive payment of our outstanding receivable, plus interest, over eight years under a tiered payment schedule. At June 30, 2020, we have 127 million Brazilian reais (approximately $23 million at June 30, 2020) of insurance against this credit risk through policies purchased from high-quality underwriters. After consideration of insurance and the allowance for expected credit losses, we do not expect this matter to have a material impact on financial results in future periods.
In the past, when faced with a potential volume reduction from any one particular segment of our trade distribution network, we generally have been able to offset such declines through increased sales throughout our broad distribution network. 
For additional information on guarantees, see Note 7 to the Consolidated Condensed Financial Statements.
Share Repurchase Program
For additional information about our share repurchase program, see Note 11 to the Consolidated Condensed Financial Statements.
Sources and Uses of Cash
The following table summarizes the net increase (decrease) in cash, cash equivalents and restricted cash for the periods presented:
 
 
Six Months Ended June 30,
Millions of dollars
 
2020
 
2019
Cash provided by (used in):
 
 
 
 
Operating activities
 
$
(745
)
 
$
(821
)
Investing activities
 
(128
)
 
(195
)
Financing activities
 
1,605

 
678

Effect of exchange rate changes
 
(138
)
 
9

Net change in cash, cash equivalents and restricted cash
 
$
594

 
$
(329
)
Cash Flows from Operating Activities
Cash used in operating activities during the six months ended June 30, 2020 decreased compared to the same period in 2019, which primarily reflects the impact of changes in working capital, including sales volume and credit management activities, reduced seasonal inventory build due to lower volume and supply constraints, and the divestiture of the Embraco compressor business as well as reduced promotional activity and focused cost control in response to COVID-19.
The timing of cash flows from operations varies significantly throughout the year primarily due to changes in production levels, sales patterns, promotional programs, funding requirements, credit management, as well as receivable and payment terms. Depending on the timing of cash flows, the location of cash balances, as well as the liquidity requirements of each country, external sources of funding are used to support working capital requirements.
Cash Flows from Investing Activities
Cash used in investing activities during the six months ended June 30, 2020 decreased compared to the same period in 2019, which primarily reflects lower capital expenditures year over year due to capital reduction actions during the COVID-19 disruption.
Cash Flows from Financing Activities
Cash provided by financing activities during the six months ended June 30, 2020 increased compared to the same period in 2019, which primarily reflects the following:
•
Proceeds from borrowings under our revolving credit facility of $2.2 billion offset by lower commercial paper borrowings (increase of approximately $1.1 billion);


40

•
Repayments of long-term debt includes the repayment of the €500 million (approximately $565 million) senior notes in March 2020 and both the repayment of $250 million in senior notes and the €600 million (approximately $673 million at repayment) Whirlpool EMEA Finance Term Loan in the prior period (decrease of approximately $370 million);
•
Proceeds from borrowings of long-term debt includes the €500 million (approximately $540 million as of February 2020) senior notes offering in February 2020, the $500 million senior notes offering in May 2020 and the $700 million senior notes offering in the prior period (decrease of approximately $150 million) ; and
•
Higher stock repurchases under our share repurchase program (increase of approximately $70 million), all of which repurchases occurred in the first quarter of 2020.
Dividends paid in financing activities during the six months ended June 30, 2020 was comparable to the same period in 2019.
Financing Arrangements
The Company had total committed credit facilities of approximately $4.2 billion at June 30, 2020. The facilities are geographically diverse and reflect the Company's global operations. The Company believes these facilities are sufficient to support its global operations and, together with other liquidity tools, to navigate through the macroeconomic uncertainty related to the COVID-19 pandemic. We had $900 million and €700 million (approximately $786 million as of June 30, 2020) outstanding under the committed credit facilities at June 30, 2020. We had no borrowings outstanding under the committed credit facilities at December 31, 2019.
For additional information about our financing arrangements, see Note 6 to the Consolidated Condensed Financial Statements.
Embraco Sale Transaction
On April 24, 2018, we and certain of our subsidiaries entered into a purchase agreement with Nidec Corporation, a leading manufacturer of electric motors incorporated under the laws of Japan, to sell our Embraco business unit (the "Transaction").
On June 26, 2019, Whirlpool and Nidec received the European Commission's final approval of the Transaction, and the parties closed the Transaction on July 1, 2019. At closing, pursuant to the purchase agreement and a subsequent agreement memorializing the purchase price adjustment, the Company received $1.1 billion inclusive of anticipated cash on hand at the time of closing, with final purchase price amounts subject to working capital and other customary post-closing adjustments. Whirlpool has agreed to retain certain liabilities relating to tax, environmental, labor and products following closing of the Transaction.
On August 9, 2019, the Company repaid $1.0 billion pursuant to the Company's April 23, 2018 Term Loan Agreement by and among the Company, Citibank, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A. as Syndication Agent, and certain other financial institutions, representing full repayment of amounts borrowed under the term loan. As previously disclosed, the Company agreed to repay this outstanding term loan amount with the net cash proceeds received from the sale of Embraco.
Dividends
In April 2020, our Board of Directors declared a quarterly dividend of $1.20 per share on our common stock.
Off-Balance Sheet Arrangements
In the ordinary course of business, we enter into agreements with financial institutions to issue bank guarantees, letters of credit, and surety bonds. These agreements are primarily associated with unresolved tax matters in Brazil, as is customary under local regulations, and other governmental obligations and debt agreements. At June 30, 2020, we had approximately $278 million outstanding under these agreements.
For additional information about our off-balance sheet arrangements, see Notes 6 and 7 to the Consolidated Condensed Financial Statements.


41

NON-GAAP FINANCIAL MEASURES
We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures, some of which we refer to as "ongoing" measures, including:
•
Earnings before interest and taxes (EBIT)
•
EBIT margin
•
Ongoing EBIT
•
Ongoing EBIT margin
•
Sales excluding foreign currency
•
Organic net sales (net sales excluding foreign currency and Embraco)
•
Free cash flow
Non-GAAP measures exclude items that may not be indicative of, or are unrelated to, results from our ongoing operations and provide a better baseline for analyzing trends in our underlying businesses. EBIT margin is calculated by dividing EBIT by net sales. Ongoing EBIT margin is calculated by dividing ongoing EBIT by net sales. Sales excluding foreign currency is calculated by translating the current period net sales, in functional currency, to U.S. dollars using the prior-year period's exchange rate compared to the prior-year period net sales. Management believes that sales excluding foreign currency provides stockholders with a clearer basis to assess our results over time, excluding the impact of exchange rate fluctuations. Organic net sales is calculated by excluding prior period net sales from our divested Embraco business and foreign currency. Management believes that organic net sales provides stockholders with a clearer basis to assess our results over time, excluding the revenue impact from our divested compressor business and exchange rate fluctuations. We also disclose segment EBIT, which we define as operating profit less interest and sundry (income) expense and excluding restructuring costs, asset impairment charges and certain other items that management believes are not indicative of the region's ongoing performance, if any, as the financial metric used by the Company's Chief Operating Decision Maker to evaluate performance and allocate resources in accordance with ASC 280, Segment Reporting.
We believe that these non-GAAP measures provide meaningful information to assist investors and stockholders in understanding our financial results and assessing our prospects for future performance, and reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial measures, provide a more complete understanding of our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for reported net sales, net earnings available to Whirlpool, net earnings as a percentage of net sales and cash provided by (used in) operating activities, the most directly comparable GAAP financial measures. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
Please refer to a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures below.
Total Whirlpool Organic Net Sales Reconciliation:
in millions

Three Months Ended June 30,
 
2020
2019
Change
Net sales
$
4,042

$
5,186

(22.1
)%
Less: Embraco net sales
—

(323
)
 
Add-Back: currency
149

—

 
Organic net sales
$
4,191

$
4,863

(13.8
)%


42

Latin America Organic Net Sales Reconciliation:
in millions

Three Months Ended June 30,
 
2020
2019
Change
Net sales
$
434

$
888

(51.1
)%
Less: Embraco net sales
—

(323
)
 
Add-Back: currency
108

—

 
Organic net sales
$
542

$
565

(4.1
)%
Total Whirlpool Organic Net Sales Reconciliation:
in millions

Six Months Ended June 30,
 
2020
2019
Change
Net sales
$
8,367

$
9,946

(15.9
)%
Less: Embraco net sales
—

(635
)
 
Add-Back: currency
256

—

 
Organic net sales
$
8,623

$
9,311

(7.4
)%
Latin America Organic Net Sales Reconciliation:
in millions

Six Months Ended June 30,
 
2020
2019
Change
Net sales
$
1,052

$
1,763

(40.3
)%
Less: Embraco net sales
—

(635
)
 
Add-Back: currency
184

—

 
Organic net sales
$
1,236

$
1,128

9.6
 %
Ongoing Earnings Before Interest & Taxes (EBIT) Reconciliation:
in millions

Three Months Ended
 
Six Months Ended
2020
2019
 
2020
2019
Net earnings available to Whirlpool (1)
$
35

$
67

 
$
187

$
538

Net earnings (loss) available to noncontrolling interests
(10
)
5

 
(15
)
8

Income tax expense (benefit)
18

130

 
89

(2
)
Interest expense
49

52

 
92

103

Earnings before interest & taxes
$
92

$
254

 
$
353

$
647

Restructuring expense
118

60

 
123

86

Divestiture related transition costs
—

11

 
—

17

Brazil indirect tax credit
—

(53
)
 
—

(180
)
Loss on disposal of businesses
—

79

 
—

79

Legacy product warranty and liability expense
—

12

 
—

12

Ongoing EBIT(2)
$
210

$
363

 
$
476

$
661

(1) 
Net earnings margin is approximately 0.9% and 2.2% for the three and six months ended June 30, 2020 , respectively, compared to 1.3% and 5.4% in the same prior year periods. Net earnings margin is calculated by dividing net earnings (loss) available to Whirlpool by consolidated net sales for the three and six months ended June 30, 2020 and June 30, 2019, respectively.
(2) 
Ongoing EBIT margin is approximately 5.2% and 5.7% for the three and six months ended June 30, 2020, respectively, compared to 7.0% and 6.6% in the same prior year periods. Ongoing EBIT margin is calculated by dividing Ongoing EBIT by consolidated net sales for the three and six months ended June 30, 2020 and June 30, 2019, respectively.


43

Free Cash Flow (FCF) Reconciliation:
in millions
Six Months Ended
2020
2019
Cash used in operating activities
$
(745
)
$
(821
)
Capital expenditures
(155
)
(197
)
Proceeds from sale of assets and business
27

5

Change in restricted cash (1)
—

16

Free cash flow
$
(873
)
$
(997
)
 
 
 
Cash used in investing activities
$
(128
)
$
(195
)
Cash provided by financing activities
1,605

678

(1) 
For additional information regarding restricted cash, see Note 3 to the Consolidated Condensed Financial Statements.
FORWARD-LOOKING PERSPECTIVE
On March 24, 2020, Whirlpool withdrew its previously announced 2020 guidance for net sales, GAAP and ongoing (non-GAAP) earnings per share, ongoing EBIT margin, regional industry outlook, cash provided by operating activities and free cash flow due to uncertainty around the business impact of the COVID-19 pandemic.
The Company expects COVID-19 driven demand disruptions and production impacts to continue to negatively affect results throughout 2020. We have taken aggressive cost reduction and cash protection actions to mitigate this impact as previously described in the Overview. However, the ultimate impact to our financial condition and results of operations depends on a number of factors which are inherently unpredictable that could have a material adverse effect as described in Part II, Item 1A. Risk Factors.
OTHER MATTERS
For additional information regarding certain of our loss contingencies/litigation, see Note 7 to the Consolidated Condensed Financial Statements.
Grenfell Tower
On June 23, 2017, London's Metropolitan Police Service released a statement that it had identified a Hotpoint–branded refrigerator as the initial source of the Grenfell Tower fire in West London. U.K. authorities are conducting investigations, including regarding the cause and spread of the fire. The model in question was manufactured by Indesit Company between 2006 and 2009, prior to Whirlpool's acquisition of Indesit in 2014. We are fully cooperating with the investigating authorities. Whirlpool has been named as a defendant in a product liability suit related to this matter, which suit is currently pending in Pennsylvania federal court. As these matters are ongoing, we cannot speculate on their eventual outcomes or potential impact on our financial statements; accordingly, we have not recorded any significant charges in 2019 or 2020. Additional claims may be filed related to this incident.
Antidumping and Safeguard Petitions
As previously reported, Whirlpool filed petitions in 2011 and 2015 alleging that Samsung, LG and Electrolux violated U.S. and international trade laws by dumping washers into the U.S. Those petitions resulted in orders imposing antidumping duties on certain washers imported from South Korea, Mexico, and China, and countervailing duties on certain washers from South Korea. These orders could be subject to administrative reviews and possible appeals. In March 2019, the order covering certain washers from Mexico was extended for an additional five years, while the order covering certain washers from South Korea was revoked.
Whirlpool also filed a safeguard petition in May 2017 to address our concerns that Samsung and LG are evading U.S. trade laws by moving production from countries covered by antidumping orders. A safeguard remedy went into effect in February 2018, implementing tariffs on finished washers and certain covered parts for three years. During the third year of the remedy, beginning February 7, 2020, the remedy imposes a 16% tariff on the first 1.2 million large residential washing machines imported into the United States ("under tariff") and a 40% tariff on such imports in excess of 1.2 million, and also imposes a 40% tariff on washer tub, drum, and cabinet imports in excess of 90,000 units. In January 2020, the President modified the safeguard order to allocate the 1.2 million under tariff by quarter during the third year of remedy (300,000 washing machines per quarter), beginning in February 2020. The President maintains discretion


44

to modify the remedy. We cannot speculate on the modification's impact, which will depend on Samsung and LG's U.S. production capabilities and import plans.
U.S. Tariffs and Global Economy
The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. The impact of previously-announced U.S. tariffs increased raw material costs during 2019 and 2020. We expect these and other tariffs to impact material and freight costs in future quarters, which could require us to modify our current business practices and could have a material adverse effect on our financial statements in any particular reporting period.
Brexit
In 2016, the UK held a referendum, the outcome of which was an expressed public desire to exit the European Union (“Brexit”), which has resulted in greater uncertainty related to the free movement of goods, services, people and capital between the UK and the EU. On January 31, 2020, the UK officially exited the European Union and entered into a transition period to negotiate the final terms of Brexit. Many potential future impacts of Brexit remain unclear and could adversely impact certain areas of our business, including, but not limited to, an increase in duties and delays in the delivery of products, and adverse impacts to our suppliers and financing institutions. In order to mitigate the risks associated with Brexit, we are preparing for potential adverse impacts by collaborating across Company functions and working with external partners to develop and revise the necessary contingency plans.


45

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our exposures to market risk since December 31, 2019.
ITEM 4.
CONTROLS AND PROCEDURES
(a)Evaluation of disclosure controls and procedures
Prior to filing this report, we completed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of June 30, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2020.
(b)Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting that occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


46

PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Information with respect to legal proceedings can be found under the heading "Commitments and Contingencies" in Note 7 to the Consolidated Condensed Financial Statements contained in Part I, Item 1 of this report.
ITEM 1A.
RISK FACTORS
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, other than as updated in our subsequent quarterly reports on Form 10–Q, including set forth below.
Our financial condition and results of operations have been and are expected to continue to be adversely affected by the ongoing COVID-19 outbreak.

We are closely monitoring the impact of the global COVID-19 pandemic on all aspects of our operations and regions, including the effect on our consumers, employees, trade customers, suppliers and distribution channels. The pandemic has created significant business disruption and economic uncertainty which has adversely impacted our manufacturing operations, supply chain, distribution channels and demand for our products.There remains significant uncertainty regarding the severity and duration of the pandemic and its impact on our business, including the severity of a “second wave” or other additional periods of increases or spikes in the number of COVID-19 cases in areas in which we operate. The adverse impact of the pandemic is expected to continue and may materially affect our financial statements in future periods.

The impacts of the pandemic include, but are not limited to, the following:
•
Production shutdowns and slowdowns, in individual or collective groups of factories in impacted countries, which have and could in the future result in increased costs and decreased efficiency, and which have and could impact our ability to respond to rapid changes in demand;
•
Lack of availability of component materials in our supply chain and an increase in raw material and component costs;
•
Recent and potential future reductions in trade customer sales volume, potential trade customer financial restructuring or insolvency, and increases in accounts receivable balances with our trade customer base;
•
Potential future impairment in value of our tangible or intangible assets could be recorded as a result of weaker economic conditions;
•
Significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future, and which has, together with operational impacts noted above, necessitated certain recent liquidity creation and preservation actions as a precautionary measure;
•
Fluctuations in forecasted earnings before tax and corresponding volatility in our effective tax rate;
•
Uncertainty with respect to the application of recently enacted economic stimulus legislation in the U.S. and abroad, including uncertainty regarding impacts to our current global tax positions and future tax planning;
•
Operational risk, including but not limited to cybersecurity risks, as a result of extended salaried workforce remote work arrangements, and operational delays as a result of recent and potential future salaried employee furlough and collective vacation actions in certain countries, and restrictions on employee travel;
•
Operational disruption if key employees terminate their employment or become ill, as well as diversion of our management team's attention from non-COVID-19 related matters;
•
Potential investigations, legal claims or litigation against us for actions we have taken or may take, or decisions we have made or may make, as a consequence of the pandemic; and


47


•
Potential delays in resolving pending legal matters as a result of court, administrative and other closures and delays in many of our regions.

Our existing insurance coverages may not respond to some of these impacts. In addition, we cannot predict the impact that COVID-19 will have on our trade customers, suppliers, consumers, and each of their financial conditions; however, any material effect on these parties could adversely impact us. The impact of COVID-19 may also exacerbate other risks discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, any of which could have a material adverse effect on our financial statements.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 25, 2017, our Board of Directors authorized a share repurchase program of up to $2 billion. During the six months ended June 30, 2020, we repurchased 902,000 shares under this share repurchase program at an aggregate price of approximately $121 million, all of which repurchases occurred in the first quarter of 2020. At June 30, 2020, there were approximately $531 million in remaining funds authorized under this program.
The following table summarizes repurchases of Whirlpool's common stock in the three months ended June 30, 2020:
Period (Millions of dollars, except number and price per share)
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans
April 1, 2020 through April 30, 2020
—

$
—

—

$
531

May 1, 2020 through May 31, 2020
—

—

—

531

June 1, 2020 through June 30, 2020
—

—

—

531

     Total
—

$
—

—

 
Share repurchases are made from time to time on the open market as conditions warrant. Given the current level of uncertainty surrounding the COVID-19 pandemic, we have decided to temporarily suspend our share repurchase program to protect liquidity in the current environment. The program does not obligate us to repurchase any of our shares and it has no expiration date.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
None.


48

ITEM 6.
EXHIBITS
Exhibit 4.1
 
 
Exhibit 10.1
 
 
Exhibit 31.1
 
 
Exhibit 31.2
 
 
Exhibit 32.1
 
 
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
 
 
101.SCH
Inline XBRL Taxonomy Extension Schema Document
 
 
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
 
 
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
 
 
Exhibit 104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


49

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
WHIRLPOOL CORPORATION
 
 
 
(Registrant)
 
By:
 
/s/ JAMES W. PETERS
 
Name:
 
James W. Peters
 
Title:
 
Executive Vice President
and Chief Financial Officer
 
Date:
 
July 23, 2020


50