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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, 2019
OR
☐
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3932
WHIRLPOOLCORPLOGOA14.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
0.625% Senior Notes due 2020
 
WHR 20
 
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 19, 2019
Common stock, par value $1 per share
 
63,527,409


WHIRLPOOL CORPORATION

QUARTERLY REPORT ON FORM 10-Q
Three and Six Months Ended June 30, 2019
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 this report's 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. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool's forward-looking statements. Among these factors are: (1) 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; (2) 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; (3) Whirlpool's ability to maintain its reputation and brand image; (4) 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; (5) Whirlpool's ability to obtain and protect intellectual property rights; (6) acquisition and investment-related risks, including risks associated with our past acquisitions, and risks associated with our increased presence in emerging markets; (7) risks related to our international operations, including changes in foreign regulations, regulatory compliance and disruptions arising from political, legal and economic instability; (8) information technology system failures, data security breaches, network disruptions, and cybersecurity attacks; (9) product liability and product recall costs; (10) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (11) our ability to attract, develop and retain executives and other qualified employees; (12) the impact of labor relations; (13) fluctuations in the cost of key materials (including steel, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (14) Whirlpool's ability to manage foreign currency fluctuations; (15) impacts from goodwill impairment and related charges; (16) triggering events or circumstances impacting the carrying value of our long-lived assets; (17) inventory and other asset risk; (18) the uncertain global economy and changes in economic conditions which affect demand for our products; (19) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and postretirement benefit plans; (20) 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; (21) the effects and costs of governmental investigations or related actions by third parties; and (22) 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.
16.
17.



4


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

 
Three Months Ended
 
Six Months Ended
 
2019
 
2018
 
2019
 
2018
Net sales
$
5,186

 
$
5,140

 
$
9,946

 
$
10,051

Expenses
 
 
 
 
 
 
 
Cost of products sold
4,254

 
4,260

 
8,202

 
8,359

Gross margin
932

 
880

 
1,744

 
1,692

Selling, general and administrative
584

 
541

 
1,089

 
1,046

Intangible amortization
18

 
20

 
36

 
40

Restructuring costs
60

 
44

 
86

 
188

Impairment of goodwill and other intangibles
—

 
747

 
—

 
747

Loss on disposal of businesses
79

 
—

 
79

 
—

Operating profit (loss)
191

 
(472
)
 
454

 
(329
)
Other (income) expense
 
 
 
 

 

Interest and sundry (income) expense
(63
)
 
90

 
(193
)
 
82

Interest expense
52

 
47

 
103

 
89

Earnings (loss) before income taxes
202

 
(609
)
 
544

 
(500
)
Income tax expense (benefit)
130

 
30

 
(2
)
 
45

Net earnings (loss)
72

 
(639
)
 
546

 
(545
)
Less: Net earnings available to noncontrolling interests
5

 
18

 
8

 
18

Net earnings (loss) available to Whirlpool
$
67

 
$
(657
)
 
$
538

 
$
(563
)
Per share of common stock
 
 
 
 
 
 
 
Basic net earnings (loss) available to Whirlpool
$
1.04

 
$
(9.50
)
 
$
8.42

 
$
(8.03
)
Diluted net earnings (loss) available to Whirlpool
$
1.04

 
$
(9.50
)
 
$
8.35

 
$
(8.03
)
Dividends declared
$
1.20

 
$
1.15

 
$
2.35

 
$
2.25

Weighted-average shares outstanding (in millions)
 
 
 
 
 
 
 
Basic
63.8

 
69.1

 
63.9

 
70.1

Diluted
64.3

 
69.1

 
64.4

 
70.1

 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
16

 
$
(802
)
 
$
583

 
$
(703
)

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, 2019

December 31, 2018
Assets



Current assets



Cash and cash equivalents
$
1,178


$
1,498

Accounts receivable, net of allowance of $145 and $136, respectively
2,387


2,210

Inventories
3,008


2,533

Prepaid and other current assets
961


839

Assets held for sale
969

 
818

Total current assets
8,503


7,898

Property, net of accumulated depreciation of $6,361 and $6,190, respectively
3,318


3,414

Right of use assets
788

 
—

Goodwill
2,450


2,451

Other intangibles, net of accumulated amortization of $565 and $527, respectively
2,260


2,296

Deferred income taxes
2,147


1,989

Other noncurrent assets
389


299

Total assets
$
19,855


$
18,347

Liabilities and stockholders' equity



Current liabilities



Accounts payable
$
4,270


$
4,487

Accrued expenses
634


690

Accrued advertising and promotions
652


827

Employee compensation
372


393

Notes payable
2,157


1,034

Current maturities of long-term debt
573


947

Other current liabilities
878


811

Liabilities held for sale
558

 
489

Total current liabilities
10,094


9,678

Noncurrent liabilities



Long-term debt
4,155


4,046

Pension benefits
586


637

Postretirement benefits
314


318

Lease liabilities
660

 
—

Other noncurrent liabilities
379


463

Total noncurrent liabilities
6,094


5,464

Stockholders' equity



Common stock, $1 par value, 250 million shares authorized, 112 million shares issued, and 63 million and 64 million shares outstanding, respectively
112


112

Additional paid-in capital
2,790


2,768

Retained earnings
7,380


6,933

Accumulated other comprehensive loss
(2,657
)

(2,695
)
Treasury stock, 49 million and 48 million shares, respectively
(4,876
)

(4,827
)
Total Whirlpool stockholders' equity
2,749


2,291

Noncontrolling interests
918


914

Total stockholders' equity
3,667


3,205

Total liabilities and stockholders' equity
$
19,855


$
18,347


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

2019

2018
Operating activities



Net earnings (loss)
$
546


$
(545
)
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:



Depreciation and amortization
302


339

Impairment of goodwill and other intangibles
—

 
747

Loss on disposal of businesses
79

 
—

Changes in assets and liabilities:



Accounts receivable
(251
)

(103
)
Inventories
(574
)

(399
)
Accounts payable
(182
)

(287
)
Accrued advertising and promotions
(180
)

(226
)
Accrued expenses and current liabilities
(41
)

191

Taxes deferred and payable, net
(179
)

(66
)
Accrued pension and postretirement benefits
(39
)

(46
)
Employee compensation
7


(31
)
Other
(309
)

(158
)
Cash used in operating activities
(821
)

(584
)
Investing activities



Capital expenditures
(197
)

(194
)
Proceeds from sale of assets and business
5


27

Proceeds from held-to-maturity securities
—

 
60

Investment in related businesses
—


(2
)
Other
(3
)

—

Cash used in investing activities
(195
)

(109
)
Financing activities



Net proceeds from borrowings of long-term debt
697


700

Repayments of long-term debt
(943
)

(376
)
Net proceeds from short-term borrowings
1,119


1,398

Dividends paid
(149
)

(159
)
Repurchase of common stock
(50
)

(1,001
)
Common stock issued
4


7

Cash provided by financing activities
678


569

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


(42
)
Decrease in cash, cash equivalents and restricted cash
(329
)

(166
)
Cash, cash equivalents and restricted cash at beginning of period
1,538


1,293

Cash, cash equivalents and restricted cash at end of period
$
1,209


$
1,127


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 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, 2018.
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.
Certain prior year amounts in the Consolidated Condensed Financial Statements have been reclassified to conform with current year presentation.
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.
Adoption of New Accounting Standards
On January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The adoption of this standard did not have a material impact on our Consolidated Condensed Financial Statements, however we have expanded our use of hedge accounting to hedge contractually specified components in commodity contracts designated as cash flow hedges. For additional information on the required disclosures related to the impact of adopting this standard, see Note 10 to the Consolidated Condensed Financial Statements.

On January 1, 2019, we adopted ASU No. 2016-02, "Leases (Topic 842)" and as part of that process the Company made the following elections:

•
The Company did not elect the hindsight practical expedient, for all leases.
•
The Company elected the package of practical expedients and, as a result, did not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs for all leases.
•
In March 2018, the FASB approved an optional transition method that allows companies to use the effective date as the date of initial application on transition. The Company elected this transition method, and as a result, did not adjust its comparative period financial information or make the newly required lease disclosures for periods before the effective date.
•
The Company elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term.
•
The Company elected to not separate lease and non-lease components for all leases.
•
The Company did not elect the land easement practical expedient.

Upon adoption, we recognized the cumulative effect of initially applying this new standard resulting in the addition of approximately $858 million of right of use assets, of which $46 million were classified as held for sale, as well as the corresponding short-term and long-term lease liabilities. Additionally, the Company has sold and leased back a group of properties in our Latin American region and, upon adoption, the Company recorded a cumulative adjustment to retained earnings of approximately $82 million related to deferred gains associated with these transactions.
For additional information on the required disclosures related to the impact of adopting this standard, see Note 3 to the Consolidated Condensed Financial Statements.


8


For additional information on held for sale assets, see Note 16 to the Consolidated Condensed Financial Statements.

All other newly issued and effective accounting standards during 2019 were not relevant or material to the Company.
Accounting Pronouncements Issued But Not Yet Effective
In November 2018, the FASB issued ASU 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606." The new standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a good or service that is a distinct unit of account. The amendments also preclude entities from presenting consideration from transactions with a collaborator that is not a customer together with revenue recognized from contracts with customers. The new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period for entities that have adopted ASC 606. The standard should be applied retrospectively to the period when initially adopted ASC 606. 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
2016-13
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
January 1, 2020
2018-13
Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
January 1, 2020
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
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
2018-17
Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
January 1, 2020

All other issued and not yet effective accounting standards are not relevant 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. Revenues related to compressors are fully reflected in our Latin America segment. For additional information on the disaggregated revenues by geographic regions, see Note 15 to the Consolidated Condensed Financial Statements.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Millions of dollars
 
2019
 
2018
 
2019
 
2018
Major product categories:
 
 
 
 
 
 
 
 
Laundry
 
$
1,492

 
$
1,463

 
$
2,975

 
$
3,025

Refrigeration
 
1,656

 
1,606

 
3,019

 
2,897

Cooking
 
1,075

 
1,089

 
2,119

 
2,138

Dishwashing
 
398

 
412

 
762

 
808

Total major product category net sales
 
$
4,621

 
$
4,570

 
$
8,875

 
$
8,868

Compressors
 
323

 
285

 
635

 
581

Spare parts and warranties
 
180

 
249

 
371

 
522

Other
 
62

 
36

 
65

 
80

Total net sales
 
$
5,186

 
$
5,140

 
$
9,946

 
$
10,051



The impact to revenue related to prior period performance obligations was not material for the three and six months ended June 30, 2019.



9


Bad Debt Expense

Bad debt expense was not material for the three and six months ended June 30, 2019.
(3)    LEASES

Leases

We lease certain manufacturing facilities, warehouses/distribution centers, office space, land, vehicles, and equipment. At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. Leases with an initial term of 12 months or less are not recorded in the Consolidated Condensed Balance Sheets and we recognize lease expense for these leases on a straight-line basis over the lease term. The Company has operating lease costs of approximately $104 million for the six months ended June 30, 2019.

As of June 30, 2019, we have approximately $82 million of non-cancelable operating lease commitments, primarily for warehouses, that have not yet commenced. These operating leases will commence between fiscal year 2019 and fiscal year 2020 with lease terms of up to 15 years.

At June 30, 2019, we have no financing leases and we have approximately $993 million of non-cancelable operating lease commitments, excluding variable consideration. The undiscounted annual future minimum lease payments are summarized by year in the table below:
Maturity of Lease Liabilities
Operating Leases
(in millions)
2019
$
99

2020
179

2021
148

2022
124

2023
112

After 2023
331

Total lease payments
$
993

Less: interest
144

Present value of lease liabilities (1)
$
849

(1) Present value of lease liabilities includes liabilities held for sale of $36 million.

The long-term portion of the lease liabilities included in the amounts above is $660 million, excluding held for sale liabilities, and the remainder of our lease liabilities, excluding held for sale liabilities, are included in other current liabilities in the Consolidated Condensed Balance Sheets.

At June 30, 2019, the weighted average remaining lease term and weighted average discount rate for operating leases was 7 years and 5%, respectively.

During the six months ended June 30, 2019 the cash paid for amounts included in the measurement of the liabilities and the operating cash flows was $100 million. The right of use assets obtained in exchange for new liabilities was $61 million in the six months ended.

As the Company's lease agreements normally do not provide an implicit interest rate, we apply the Company's incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments. Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, location of the lease, and the Company’s credit risk relative to risk-free market rates.

Many of our leases include renewal options that can extend the lease term. The execution of those renewal options is at our sole discretion and reflected in the lease term when they are reasonably certain to be exercised.

Certain leases also include options to purchase the underlying asset at fair market value. If leased assets have leasehold improvements, typically the depreciable life of those leasehold improvements are limited by the expected lease term. Additionally, certain lease agreements include lease payment adjustments for inflation.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.


10



We rent or sublease certain real estate to third parties. Our sublease portfolio primarily consists of operating leases within our warehouses, resulting in a nominal amount of sublease income in 2019.
(4)    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
2019
 
2018
Cash and cash equivalents as presented in our Consolidated Condensed Balance Sheets
$
1,178

 
$
1,057

Restricted cash included in prepaid and other current assets (1)
25

 
47

Restricted cash included in other noncurrent assets (1)
—

 
23

Cash included in assets held for sale
6

 
—

Cash, cash equivalents and restricted cash as presented in our Consolidated Condensed Statements of Cash Flows
$
1,209

 
$
1,127

(1)Change in restricted cash reflects realization of foreign currency translation adjustments of $(1) million and $1 million, respectively, for the six months ended June 30, 2019 and 2018 compared to the prior fiscal year end.
 
December 31,
Millions of dollars
2018
 
2017
Cash and cash equivalents as presented in our Consolidated Balance Sheets
$
1,498

 
$
1,196

Restricted cash included in prepaid and other current assets
40

 
48

Restricted cash included in other noncurrent assets
—

 
49

Cash, cash equivalents and restricted cash as presented in our Consolidated Statements of Cash Flows
$
1,538

 
$
1,293



Restricted cash can only be 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 completed in October 2014. 
(5)    INVENTORIES
The following table summarizes our inventory at June 30, 2019 and December 31, 2018:
Millions of dollars

June 30, 2019

December 31, 2018
Finished products

$
2,547


$
2,076

Raw materials and work in process

618


617



3,165


2,693

Less: excess of FIFO cost over LIFO cost

(157
)

(160
)
Total inventories

$
3,008


$
2,533


LIFO inventories represented 46% and 41% of total inventories at June 30, 2019 and December 31, 2018, respectively.


11


(6)    PROPERTY, PLANT & EQUIPMENT
The following table summarizes our property, plant and equipment at June 30, 2019 and December 31, 2018:
Millions of dollars

June 30, 2019

December 31, 2018
Land

$
101


$
102

Buildings

1,607


1,593

Machinery and equipment

7,971


7,909

Accumulated depreciation

(6,361
)

(6,190
)
Property, plant and equipment, net

$
3,318


$
3,414


During the six months ended June 30, 2019, we disposed of buildings, machinery and equipment no longer in use with a net book value of $6 million and the loss on the disposal was not material.
(7)    FINANCING ARRANGEMENTS
Debt Offering
On February 26, 2019, Whirlpool Corporation, completed a bond offering of $700 million 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 under the Securities Act of 1933, as amended, pursuant to our Registration Statement on Form S-3 (File No.333-224381) previously filed with the Securities and Exchange Commission. 
Debt Repayment
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. On March 1, 2019, $250 million of 2.40% senior notes matured and were repaid. On April 26, 2018, $363 million of 4.50% senior notes matured and were repaid.
Term Loan Agreements

On April 23, 2018 the Company entered into, and on May 14, 2018 and August 30, 2018 the Company amended, a Term Loan Agreement (the "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. Citibank, N.A., JPMorgan Chase Bank, N.A., BNP Paribas Securities Corp., Mizuho Bank, Ltd., and Wells Fargo Securities, LLC acted as Joint Lead Arrangers and Joint Bookrunners for the Term Loan Agreement. The Term Loan Agreement provides for an aggregate lender commitment of $1.0 billion and is recorded in notes payable in our Consolidated Condensed Balance Sheets. The Term Loan Agreement had a maturity date of April 22, 2019. On March 27, 2019 the Company extended the Termination Date of the Term Loan Agreement for an additional six months to October 23, 2019. The Company also has agreed to repay the outstanding term loan amounts with the net cash proceeds received from the closing of the Embraco sale transaction which will occur in the third quarter of 2019. The Embraco sale transaction closed on July 1, 2019. The proceeds of the Term Loan Agreement were used to fund accelerated share repurchases through a modified Dutch auction tender offer.
The interest and fee rates payable with respect to the term loan facility based on the Company's current debt rating are as follows: (1) the spread over LIBOR is 1.125%; (2) the spread over prime is 0.125%; and (3) the ticking fee is 0.125%, as of the date hereof. The Term Loan Agreement, as amended, contains customary covenants and warranties including, among other things, a debt to capitalization ratio of less than or equal to 0.65 to 1.00 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 to 1.0 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; (iii) incur debt or off-balance sheet obligations at the subsidiary level; (iv) enter into transactions with affiliates, except on an arms-length basis or with or between subsidiaries; (v) enter into agreements restricting the payment of subsidiary dividends


12


or restricting the making of loans or repayment of debt by subsidiaries to the Company or other subsidiaries; and (vi) enter into agreements restricting the creation of liens on its assets.
Credit Facilities
On September 27, 2017, Whirlpool Corporation exercised its commitment increase and term extension rights under the Third Amended and Restated Long-Term Credit Agreement (the "Amended Long-Term 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. In connection with this exercise, the Company entered into a Consent to Commitment Increase agreement with the Administrative Agent, which increases aggregate borrowing capacity under the Amended Long-Term Facility from $2.5 billion to $3.0 billion, and the Administrative Agent received extension request consents from a majority of lenders, which extends the termination date of the Amended Long-Term Facility by one year, to May 17, 2022. On March 28, 2019, the Amended Long-Term Facility was amended to add one of the Company's U.K. subsidiaries as an additional borrower.
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 LIBOR is 1.125%; (2) the spread over prime is 0.125%; and (3) the unused commitment fee is 0.125%. The Amended Long-Term Facility, as amended, contains customary covenants and warranties including, among other things, a debt to capitalization ratio of less than or equal to 0.65 to 1.00 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 to 1.0 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 or off-balance sheet obligations at the subsidiary level; (iv) enter into transactions with affiliates, except on an arms-length basis or with or between subsidiaries; (v) enter into agreements restricting the payment of subsidiary dividends or restricting the making of loans or repayment of debt by subsidiaries to the Company or other subsidiaries; and (vi) enter into agreements restricting the creation of liens on our assets.
In addition to the committed $3.0 billion Amended Long-Term Facility, we have a committed European facility and committed credit facilities in Brazil. The European facility provides borrowings up to €250 million (approximately $284 million at June 30, 2019 and $286 million at December 31, 2018), maturing on September 26, 2019. The committed credit facilities in Brazil provide borrowings up to 1.0 billion Brazilian reais (approximately $261 million at June 30, 2019 and $258 million at December 31, 2018), maturing through 2022.
We had no borrowings outstanding under the committed credit facilities at June 30, 2019 or December 31, 2018.
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, 2019 and December 31, 2018:
Millions of dollars
 
June 30, 2019
 
December 31, 2018
Commercial paper
 
$
947

 
$
—

Short-term borrowings due to banks
 
1,210

 
1,034

Total notes payable
 
$
2,157

 
$
1,034


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 $255 million and $161 million as of June 30, 2019 and December 31, 2018, respectively.


13

(8)    COMMITMENTS AND CONTINGENCIES
Embraco Antitrust Matters
Beginning in February 2009, our compressor business headquartered in Brazil ("Embraco") was notified of antitrust investigations of the global compressor industry by government authorities in various jurisdictions. Embraco has resolved 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.
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. Prior to the adoption of Topic 606, the excise taxes in our Brazilian operations were reflected in revenue. In accordance with Topic 606, we made a policy election to exclude non-income taxes from the transaction price. As a result, these credits were reflected in interest and sundry (income) expense as they were monetized in 2017 and 2018.
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 has been 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 has been appealed by the Brazilian government. Based on this ruling, we were entitled to recognize $72 million in additional credits, which were recognized in prior periods. As of June 30, 2019, 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 as of June 30, 2019. 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 1.9 billion Brazilian reais (approximately $499 million as of June 30, 2019).
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 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 251 million Brazilian reais (approximately $66 million as of June 30, 2019), 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.
In 2001, Brazil adopted a law making the profits of controlled foreign corporations of Brazilian entities subject to income and social contribution tax regardless of whether the profits were repatriated ("CFC Tax"). Our Brazilian subsidiary, along with other corporations, challenged tax assessments on foreign profits on constitutionality and other grounds. In April 2013, the Brazilian Supreme Court ruled on one of our cases, finding that the law is constitutional, but remanded the case to a lower court for consideration of other arguments raised in our appeal, including the existence of tax treaties with jurisdictions in which controlled foreign corporations are domiciled. As of June 30, 2019, our potential exposure for income and social contribution taxes relating to profits of controlled foreign corporations, including interest and penalties and net of expected foreign tax credits, is approximately 210 million Brazilian reais


14

(approximately $55 million as of June 30, 2019). 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 as of June 30, 2019.
In addition to the IPI tax credit and CFC Tax matters noted above, other assessments issued to us by the Brazilian tax authorities related to non-income 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. 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.
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, during the first quarter 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 $43 million and $15 million in taxes and fees, respectively, that we anticipate will be paid in 2019.

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, during the second quarter 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 and $1 million in taxes and fees, respectively, that we anticipate will be paid in 2019.
The ICMS credits and related fees are recorded in interest and sundry (income) expense in our Consolidated Condensed Statements of Comprehensive Income. The Brazilian tax authorities have sought clarification before the Brazilian Supreme Court 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. 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.
The Company has similar cases with other Brazilian subsidiaries related to approximately $15 million in potential ICMS credits for which we have yet to receive a ruling. There is substantial uncertainty about both the amount and timing of any recovery, and as such, no amounts have been recognized.
Competition Investigation
In 2013, the French Competition Authority ("FCA") commenced an investigation of appliance manufacturers and retailers in France. The investigation includes a number of manufacturers, including the Whirlpool and Indesit operations in France.

On June 26, 2018, Whirlpool France SAS, a subsidiary of the Company, reached an agreement with the staff of the FCA to settle the first part of its investigation, which relates to a 14-month period during parts of 2006-07 and 2008-09. In the third quarter of 2018, we accrued €95 million after entering into a preliminary settlement agreement with the FCA. On December 6, 2018, the FCA's college issued its final decision, setting the final amount of the fine at €102 million, with €56 million attributable to Whirlpool's France business and €46 million attributable to Indesit's France business. Payment of the Indesit portion of the FCA fine (€46 million, or approximately $52 million at March 31, 2019) was made in the first quarter of 2019 and payment of the Whirlpool portion of the FCA fine (€56 million, or approximately $63 million) was made in April 2019. Under the terms of a settlement with Indesit's former owners, the former owners paid €17 million out of escrow to the Company in the second quarter of 2019.


15


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, this matter may have on our financial statements, the resolution of the second part of 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. We are reviewing the claims made by the insolvency trustee. Based on our preliminary understanding of the facts and the applicable law, we expect to vigorously defend against the claims. Although it is currently not possible to assess the impact this matter may have on our Consolidated Condensed Financial Statements, the resolution of this matter could have a material adverse effect on our financial statements in any particular reporting period.

Other Litigation
We are currently defending against two lawsuits that have been certified for class action treatment in U.S. federal court, relating to two top-load washing machine models. 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 of loss, if any, at this time. The resolution of this matter 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.
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

2019

2018
Balance at January 1

$
268


$
277

Issuances/accruals during the period

128


145

Settlements made during the period/other

(143
)

(147
)
Balance at June 30

$
253


$
275

 
 
 
 
 
Current portion

$
178


$
200

Non-current portion

75


75

Total

$
253


$
275



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


16

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.

In the second quarter of 2019, we incurred approximately $12 million of additional product warranty expense related to our previously disclosed legacy Indesit dryer corrective action campaign in the UK. 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 credit worthy customers, the subsidiary guarantees customer lines of credit at commercial banks to support purchases following its normal credit policies. If 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, 2019 and December 31, 2018, the guaranteed amounts totaled $107 million and $146 million, respectively. The fair value of these guarantees were nominal at June 30, 2019 and December 31, 2018. 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 credit facilities available under these lines for consolidated subsidiaries totaled $2.6 billion and $3.5 billion at June 30, 2019 and December 31, 2018, respectively. Our total short-term outstanding bank indebtedness under guarantees was nominal at June 30, 2019 and $21 million at December 31, 2018.
(9)    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

2019

2018

2019

2018

2019

2018
Service cost

$
—


$
—


$
2


$
2


$
1


$
1

Interest cost

31


29


6


6


4


3

Expected return on plan assets

(45
)

(42
)

(8
)

(9
)

—


—

Amortization:












Actuarial loss

12


13


2


2


—


—

Prior service credit

—


—


—


—


(3
)

(2
)
Settlement and curtailment (gain) loss

—


—


—


(3
)

—


—

Net periodic benefit cost (credit)

$
(2
)

$
—


$
2


$
(2
)

$
2


$
2


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
United States
Pension Benefits
 
Foreign
Pension Benefits
 
Other Postretirement
Benefits
Millions of dollars
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Service cost
 
$
1

 
$
1

 
$
3

 
$
3

 
$
3

 
$
3

Interest cost
 
62

 
59

 
12

 
12

 
8

 
7

Expected return on plan assets
 
(89
)
 
(85
)
 
(15
)
 
(17
)
 
—

 
—

Amortization:
 

 
 
 
 
 
 
 
 
 
 
Actuarial loss
 
24

 
26

 
4

 
5

 
—

 
—

Prior service credit
 
(1
)
 
(1
)
 
—

 
—

 
(5
)
 
1

Settlement and curtailment (gain) loss
 
—

 
—

 
1

 
(3
)
 
(7
)
 
—

Net periodic benefit cost (credit)
 
$
(3
)
 
$
—

 
$
5

 
$
—

 
$
(1
)
 
$
11




17

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
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Operating profit (loss)
 
$
—

 
$
—

 
$
2

 
$
2

 
$
1

 
$
1

Interest and sundry (income) expense
 
(2
)
 
—

 
—

 
(4
)
 
1

 
1

Net periodic benefit cost
 
$
(2
)
 
$
—

 
$
2

 
$
(2
)
 
$
2

 
$
2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
United States
Pension Benefits
 
Foreign
Pension Benefits
 
Other Postretirement
Benefits
Millions of dollars
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Operating profit (loss)
 
$
1

 
$
1

 
$
3

 
$
3

 
$
3

 
$
3

Interest and sundry (income) expense
 
(4
)
 
(1
)
 
2

 
(3
)
 
(4
)
 
8

Net periodic benefit cost
 
$
(3
)
 
$
—

 
$
5

 
$
—

 
$
(1
)
 
$
11


During the second quarter 2011, we modified retiree medical benefits for certain retirees to be consistent with those benefits provided by the Whirlpool Corporation Group Benefit Plan. We accounted for these changes as a plan amendment in 2011, resulting in a reduction in the postretirement benefit obligation of $138 million, of which approximately $89 million of benefit has been recognized in net earnings since 2011, with an offset to accumulated other comprehensive loss, net of tax. In response, a group of retirees initiated legal proceedings against Whirlpool asserting the above benefits are vested and changes to the plan are not permitted.
On February 15, 2019, we received a favorable decision from the United States Court of Appeals for the Sixth Circuit, which held that the benefits at issue are not vested for life and may be altered. On April 4, 2019, the Sixth Circuit Court issued a mandate to the district court, requiring it to take steps to implement this decision. The impact to the financial statements in 2019 related to this decision was not material and we do not expect a material financial impact in future periods.
(10)    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. The accounting for changes in the fair value of a derivative depends on the intended use and designation of the derivative instrument. Hedging ineffectiveness and a net earnings impact occur when the change in the fair value of the hedge does not offset the change in the fair value of the hedged item. The ineffective portion of the gain or loss is recognized in earnings. The fair value of the hedge asset or liability is presented in either other current assets/liabilities or other noncurrent assets/liabilities in the Consolidated Condensed Balance Sheets and in other within cash 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.
Hedging Strategy
In the normal course of business, we manage risks relating to our ongoing business operations including those arising from changes in foreign exchange rates, interest rates and commodity prices. 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.


18

Foreign Currency Exchange 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 and intercompany loans. These forecasted cross-currency cash flows relate primarily to foreign currency denominated expenditures and intercompany financing agreements, royalty agreements 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 in interest and sundry (income) expense for both the payable/receivable and the derivative. Therefore, as a result of this economic hedge, we do not elect hedge accounting.
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.
Interest Rate Risk
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 also may utilize a cross-currency interest rate swap agreement to manage our exposure relating to certain intercompany debt denominated in one foreign currency that will be repaid in another foreign currency. At June 30, 2019 there was $700 million notional amount of outstanding interest rate swap agreements. At December 31, 2018 there were no outstanding interest rate swap agreements.
We enter into swap rate lock agreements to effectively modify our exposure to interest rate risk by locking in interest rates on probable long-term debt issuances.
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, 2019 and December 31, 2018:
 
 
Notional (Local)
 
Notional (USD)
 
Current Maturity
Instrument
 
2019
 
2018
 
2019
 
2018
 
Senior note - 0.625%
 
€
500

 
€
500

 
$
569

 
$
573

 
March 2020
Commercial Paper
 
€
296

 
€
—

 
$
337

 
$
—

 
July 2019
Foreign exchange forwards/options
 
MXN 7,200

 
MXN 7,200

 
$
375

 
$
366

 
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 (OCI) 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 in our Consolidated Condensed Statements of Comprehensive Income. As of June 30, 2019 and December 31, 2018, there was no ineffectiveness on hedges designated as net investment hedges.


19

The following table summarizes our outstanding derivative contracts and their effects in our Consolidated Condensed Balance Sheets at June 30, 2019 and December 31, 2018:
 

 

Fair Value of

Type 
of
Hedge(1)

 


Notional Amount

Hedge Assets

Hedge Liabilities

Maximum Term (Months)
Millions of dollars

2019

2018

2019

2018

2019

2018


2019

2018
Derivatives accounted for as hedges


















Foreign exchange forwards/options

$
3,108


$
3,126


$
43


$
49


$
44


$
48


(CF/NI)

38

44
Commodity swaps/options

235


216


4


1


21


27


(CF)

24

30
Interest rate derivatives
 
700

 
—

 
14

 
—

 
36

 
—

 
(CF)
 
116
 
0
Total derivatives accounted for as hedges







$
61


$
50


$
101


$
75







Derivatives not accounted for as hedges


















Foreign exchange forwards/options

$
2,804


$
4,382


$
20


$
27


$
23


$
69


N/A

15

21
Commodity swaps/options

4


3


—


—


—


—


N/A

24

0
Total derivatives not accounted for as hedges







20


27


23


69







Total derivatives





$
81


$
77


$
124


$
144
































Current





$
40


$
60


$
52


$
95







Noncurrent







41


17


72


49







Total derivatives





$
81


$
77


$
124


$
144








(1) Derivatives accounted for as hedges are considered either cash flow (CF) or net investment (NI) hedges.



20

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 ) (2)
Cash Flow Hedges - Millions of dollars
 
 
2019
 
2018
Foreign exchange forwards/options
 
$
(4
)
 
$
76

Commodity swaps/options
 
(22
)
 
—

Interest rate derivatives
 
(5
)
 
—

 
 
 
 
 
Net Investment Hedges
 
 
 
 
Foreign currency
 
(20
)
 
69

 
 
$
(51
)
 
$
145

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
2019
 
2018
Foreign exchange forwards/options
 
Net sales
 
$
(1
)
 
$
—

Foreign exchange forwards/options
 
Cost of products sold
 
6

 
(6
)
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
(4
)
 
50

Commodity swaps/options (3)
 
Cost of products sold
 
$
(6
)
 
$
10

Interest rate derivatives
 
Interest expense
 
$
3

 
$
(1
)
Interest rate derivatives
 
Interest and sundry (income) expense
 
(8
)
 
—

 
 
 
 
$
(10
)
 
$
53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
2019
 
2018
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
$
(35
)
 
$
134

(2) The tax impact of the cash flow hedges was $5 million and $(5) million for the three months ended June 30, 2019 and 2018. The tax impact of the net investment hedges was $5 million and $(13) million for the three months ended June 30, 2019 and 2018, respectively.
(3) Cost for commodity swaps/options are recognized in cost of sales as products are sold.


21

 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
Gain (Loss)
Recognized in OCI
(Effective Portion)(4)
Cash Flow Hedges - Millions of dollars
 
 
 
 
 
2019
 
2018
Foreign exchange
 
$
24

 
$
76

Commodity swaps/options
 
—

 
(15
)
Interest rate derivatives
 
(22
)
 

 
 
 
 
 
Net Investment Hedges
 
 
 
 
Foreign currency
 
(19
)
 
6

 
 
$
(17
)
 
$
67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
2019
 
2018
Foreign exchange forwards/options
 
Net sales
 
$
(2
)
 
$
(2
)
Foreign exchange forwards/options
 
Cost of products sold
 
11

 
(12
)
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
33

 
56

Commodity swaps/options (3)
 
Cost of products sold
 
(9
)
 
23

Interest rate derivatives
 
Interest expense
 
4

 
(1
)
Interest rate derivatives
 
Interest and sundry (income) expense
 
—

 

 
 
 
 
$
37

 
$
64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
2019
 
2018
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
$
(6
)
 
$
63


(4) The tax impact of the cash flow hedges was $10 million and $0 million for the six months ended June 30, 2019 and 2018. The tax impact of the net investment hedges was $6 million and $(1) million for the six months ended June 30, 2019 and 2018, respectively.
For cash flow hedges, the amount of ineffectiveness recognized in interest and sundry (income) expense was nominal for the periods ended June 30, 2019 and 2018. There were no hedges designated as fair value for the periods ended June 30, 2019 and 2018. 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 nominal.
(11)    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.
The non-recurring fair values represent only those assets whose carrying values were adjusted to fair value during the reporting period. See Note 17 to the Consolidated Condensed Financial Statements for additional information on the goodwill and other intangible impairment during the second quarter of 2018.



22

The following table summarizes the valuation of our assets and liabilities measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018 are as follows:






Fair Value
Millions of dollars

Total Cost Basis

Level 1

Level 2

Total
Measured at fair value on a recurring basis:

2019

2018

2019

2018

2019

2018

2019

2018
Money market funds(1)

$
634


$
511


$
3


$
5


$
631


$
506


$
634


$
511

Net derivative contracts

—


—


—


—


(43
)

(67
)

(43
)

(67
)
Available for sale investments

7


7


18


12


—


—


18


12

(1) Money market funds are comprised primarily of government obligations or time deposits with banks and other first tier obligations.
The following table summarizes the valuation of our assets measured at fair value on a non-recurring basis as of June 30, 2018:
 
 
Fair Value
Millions of dollars
 
Level 3
Measured at fair value on a non-recurring basis:
 
2018
Assets:
 
 
Goodwill (2)
 
$
315

Indefinite-lived intangible assets (3)
 
384

Definite-lived intangible assets (4)
 
—

Total level 3 assets
 
$
699


(2) Goodwill with a carrying amount of $894 million was written down to a fair value of $315 million resulting in a goodwill impairment charge of $579 million during the second quarter of 2018.

(3) Indefinite-lived intangible assets with a carrying amount of approximately $492 million were written down to a fair value of $384 million resulting in an impairment charge of $108 million during the second quarter of 2018.

(4) A definite-lived intangible asset with a carrying amount of approximately $60 million was written down to a fair value of $0 million resulting in an impairment charge of $60 million during the second quarter of 2018.

Goodwill

We have four reporting units for which we assess for impairment. We use a discounted cash flow analysis to determine fair value and consistent projected financial information in our analysis of goodwill and intangible assets. The discounted cash flow analysis for the quantitative impairment assessment for the EMEA reporting unit during the second quarter of 2018 utilized a discount rate of 12%. Based on the quantitative assessment performed, the carrying value of the EMEA reporting unit exceeded its fair value resulting in a goodwill impairment charge of $579 million during the second quarter of 2018.

Other Intangible Assets

The relief-from-royalty method for the quantitative impairment assessment for other intangible assets in the EMEA reporting unit during the second quarter of 2018 utilized discount rates ranging from 11.5% - 16% and royalty rates ranging from 1.5% - 3.5%. Based on the quantitative impairment assessment performed, the carrying value of certain other intangible assets, primarily the Indesit and Hotpoint* brands, exceeded their fair value, resulting in an impairment charge of $168 million during the second quarter of 2018.

See Note 17 to the Consolidated Condensed Financial Statements for additional information.

South Africa Disposal Group

During the second quarter of 2019, we entered into an agreement to sell our South Africa business. 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.


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


23

See Note 16 to the Consolidated Condensed Financial Statements for additional information.

Other Fair Value Measurements
The fair value of long-term debt (including current maturities) was $4.92 billion and $4.17 billion at June 30, 2019 and December 31, 2018, respectively, and was estimated using discounted cash flow analysis based on incremental borrowing rates for similar types of borrowing arrangements (Level 2 input).

(12)    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, 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)]. For additional information regarding the adoption of this accounting standard, see Notes 1 and 3 to the Consolidated Condensed Financial Statements.


24

 
 
 
 
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, 2017
 
$
5,128

 
$
7,352

 
$
(2,331
)
 
$
(935
)
 
$
112

 
$
930

Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
94

 
94

 
—

 
—

 
—

 
—

Other comprehensive income
 
5

 
—

 
4

 
—

 
—

 
1

Comprehensive income
 
99

 
94

 
4

 
—

 
—

 
1

Adjustment to beginning retained earnings (2)
 
72

 
72

 
—

 
—

 
—

 
—

Adjustment to beginning accumulated other comprehensive loss
 
(17
)
 
—

 
(17
)
 
—

 
—

 
—

Stock issued (repurchased)
 
16

 
—

 
—

 
16

 
—

 
—

Dividends declared
 
(78
)
 
(78
)
 
—

 
—

 
—

 
—

Balances, March 31, 2018
 
5,220

 
7,440

 
(2,344
)
 
(919
)
 
112

 
931

Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
 
(639
)
 
(657
)
 
—

 
—

 
—

 
18

Other comprehensive income
 
(163
)
 
$
—

 
(162
)
 
$
—

 
$
—

 
$
(1
)
Comprehensive income
 
(802
)
 
(657
)
 
(162
)
 
—

 
—

 
17

Stock issued (repurchased)
 
(990
)
 
$
—

 
—

 
$
(990
)
 
$
—

 
$
—

Dividends declared
 
(84
)
 
(82
)
 
—

 
—

 
—

 
(2
)
Balances, June 30, 2018
 
3,344

 
6,701

 
(2,506
)
 
(1,909
)
 
112

 
946


(2) Increase to beginning retained earnings is due to the following accounting standard adoptions: ASU 2014-09 [increase of approximately $0.4 million], ASU 2016-01 [increase of approximately $17 million] and ASU 2016-16 [increase of approximately $56 million].


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,
 
 
2019
 
2018
Millions of dollars
 
Pre-tax
Tax Effect
Net
 
Pre-tax
Tax Effect
Net
Currency translation adjustments (3)
 
$
(54
)
$
5

$
(49
)
 
$
(177
)
$
(13
)
$
(190
)
Cash flow hedges
 
(21
)
5

(16
)
 
23

(5
)
18

Pension and other postretirement benefits plans
 
11

(2
)
9

 
13

(4
)
9

Other comprehensive income (loss)
 
(64
)
8

(56
)
 
(141
)
(22
)
(163
)
Less: Other comprehensive income (loss) available to noncontrolling interests
 
(1
)
—

(1
)
 
(1
)
—

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

$
(55
)
 
$
(140
)
$
(22
)
$
(162
)
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
2019

2018
Millions of dollars
 
Pre-tax
Tax Effect
Net
 
Pre-tax
Tax Effect
Net
Currency translation adjustments(3)
 
$
38

$
6

$
44

 
$
(189
)
$
(1
)
$
(190
)
Cash flow
 
(35
)
10

(25
)
 
(3
)
—

(3
)
Pension and other postretirement benefits plans
 
22

(4
)
18

 
50

(15
)
35

Other comprehensive income (loss)
 
25

12

37

 
(142
)
(16
)
(158
)
Less: Other comprehensive income (loss) available to noncontrolling interests
 
(1
)

(1
)
 
—

—

—

Other comprehensive income (loss) available to Whirlpool
 
$
26

$
12

$
38

 
$
(142
)
$
(16
)
$
(158
)
`(3) 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, 2019:
 
 
Three Months Ended
 
Six Months Ended
 
 
Millions of dollars
 
(Gain) Loss Reclassified
 
(Gain) Loss Reclassified
 
Classification in Earnings
Pension and postretirement benefits, pre-tax
 
11

 
22

 
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
 
2019

2018
 
2019
 
2018
Numerator for basic and diluted earnings per share - Net earnings (loss) available to Whirlpool
 
$
67

 
$
(657
)
 
$
538

 
$
(563
)
Denominator for basic earnings per share - weighted-average shares
 
63.8

 
69.1

 
63.9

 
70.1

Effect of dilutive securities - share-based compensation
 
0.5

 
—

 
0.5

 
—

Denominator for diluted earnings per share - adjusted weighted-average shares
 
64.3

 
69.1

 
64.4

 
70.1

Anti-dilutive stock options/awards excluded from earnings per share
 
1.5

 
2.0

 
1.5

 
1.9


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, 2019, we repurchased 360,326 shares under this share repurchase program at an aggregate price of approximately $50 million. At June 30, 2019, there were approximately $750 million in remaining funds authorized under this program.
Share repurchases are made from time to time on the open market as conditions warrant. These programs do not obligate us to repurchase any of our shares and they have no expiration date.
(13)    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:
In 2015, we committed to a restructuring plan to integrate our Italian legacy operations with those of Indesit. The industrial restructuring plan which was approved by the relevant labor unions and signed by the Italian government in 2015, provided for the closure or repurposing of certain manufacturing facilities and headcount reductions at other facilities. In addition, the restructuring plan provided for headcount reductions in the salaried employee workforce. These actions are substantially complete.
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. We expect these actions will be complete in 2019 with approximately $26 million expense remaining.
The following table summarizes the restructuring actions above for the six months ended June 30, 2019 and the total costs to date for each plan:
Millions of dollars
2019
Total
Indesit
$
8

$
236

EMEA fixed cost actions
$
38

$
52









27

The following table summarizes the changes to our restructuring liability during the six months ended June 30, 2019:
Millions of dollars
December 31, 2018
Charges to Earnings
Cash Paid
Non-Cash and Other
June 30, 2019
Employee termination costs
$
84

$
49

$
(80
)
$
—

$
53

Asset impairment costs
—

28

(7
)
(12
)
9

Facility exit costs
(9
)
4

(11
)
—

(16
)
Other exit costs
21

5

(3
)
—

23

Total
$
96

$
86

$
(101
)
$
(12
)
$
69


The following table summarizes the restructuring charges by operating segment for the period presented:
 
Six Months Ended
Millions of dollars
June 30, 2019
North America
$
—

EMEA
77

Latin America
8

Asia
1

Corporate / Other
—

Total
$
86



On May 31, 2019, we announced our intention to reconvert our Naples, Italy manufacturing plant and potentially sell the plant to a third party. Such actions are subject to continued negotiation and discussion with the Italian government, certain labor unions and potential third-party purchasers, and are subject to regulatory and legal review, as well as final approval of the relevant parties. As of June 30, 2019, the Company has not committed to a specific restructuring plan, therefore no liability has been incurred related to this matter.


28

(14)    INCOME TAXES
Income tax expense (benefit) was $130 million and $(2) million for the three and six months ended June 30, 2019, respectively, compared to income tax expense of $30 million and $45 million in the same periods of 2018. For the three months ended June 30, 2019, the increase in the effective tax rate from the prior period is due primarily to a higher level of earnings and related tax expense and impact of changes in enacted tax rates. For the six months ended June 30, 2019, the decrease in the effective tax rate from the prior period is due to valuation allowance releases, partially offset by higher level of earnings and related tax expense, non-deductible impairments and government payments.
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

2019

2018

2019

2018
Earnings (loss) before income taxes

$
202


$
(609
)

$
544


$
(500
)









Income tax expense (benefit) computed at United States statutory tax rate

42


(128
)

114


(105
)
Valuation allowances

39


39


(196
)

39

Audits and settlements
 
(13
)
 
(3
)
 
(13
)
 
(3
)
U.S. foreign income items, net of credits

4


(34
)

11


(45
)
Changes in enacted tax rates
 
25

 
—

 
25

 
—

Non deductible impairments
 
—

 
138

 
—

 
138

Non deductible government payments
 
—

 
37

 
—

 
37

Other

33


(19
)

57


(16
)
Income tax expense (benefit) computed at effective worldwide tax rates

$
130


$
30


$
(2
)

$
45


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.  We have reduced the valuation allowance to reflect the estimated amount of certain deferred tax assets associated with net operating losses and other deferred tax assets we believe are now more-likely-than-not to be realized.  During the first quarter of 2019, upon completion of our $700 million bond offering, we used the proceeds to refinance and recapitalize various entities in the EMEA region. Based upon our existing transfer pricing policies, these actions are expected to provide sufficient future taxable income to realize the deferred tax assets. In addition, these actions inject additional internal capital into certain EMEA entities to meet local country capitalization requirements, repay all outstanding borrowings under the Whirlpool EMEA Finance Term Loan and prepare for the Embraco divestiture. Accordingly, we reduced the valuation allowance by $235 million during the first quarter of 2019. During the second quarter of 2019, we increased our total valuation allowance by $39 million related to disposals of businesses in Turkey and South Africa and tax planning strategies that are no longer prudent.


29

(15)    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, which are included in Other/Eliminations.


30

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


Three Months Ended June 30,
 

OPERATING SEGMENTS

Millions of dollars

North
America

EMEA

Latin
America

Asia

Other/
Eliminations
Total
Whirlpool
Net sales











2019

$
2,858


$
1,032


$
888


$
430


$
(22
)
$
5,186

2018

2,782


1,096


852


428


(18
)
5,140

Intersegment sales











2019

$
45


22


342


87


(496
)
—

2018

70


26


341


84


(521
)
—

Depreciation and amortization

















2019

$
55


$
58


$
13


$
17


$
17

$
160

2018

47


57


26


16


16

162

EBIT











2019

$
353


(16
)

56


15


(154
)
254

2018

331


(25
)

33


43


(944
)
(562
)
Total assets

















June 30, 2019

$
7,988


$
9,432


$
5,119


$
2,640


$
(5,324
)
$
19,855

December 31, 2018

7,161


7,299


4,745


2,636


(3,494
)
18,347

Capital expenditures











2019

$
43


17


21


19


12

112

2018

41


34


18


16


19

128

 
 
 
 
 
 
 
 
 
 
 
 


Six Months Ended June 30,
 

OPERATING SEGMENTS

Millions of dollars

North
America

EMEA

Latin
America

Asia

Other/
Eliminations
Total
Whirlpool
Net sales











2019

$
5,393


$
2,036


$
1,763


$
801


$
(47
)
$
9,946

2018

5,298


2,164


1,750


876


(37
)
10,051

Intersegment sales











2019

$
111


43


679


171


(1,004
)
—

2018

137


64


627


159


(987
)
—

Depreciation and amortization

















2019

$
104


$
101


$
31


$
34


$
32

$
302

2018

96


114


64


34


31

339

EBIT











2019

$
665


(37
)

101


22


(104
)
647

2018

619


(52
)

90


62


(1,130
)
(411
)
Total assets

















June 30, 2019

$
7,988


$
9,432


$
5,119


$
2,640


$
(5,324
)
$
19,855

December 31, 2018

7,161


7,299


4,745


2,636


(3,494
)
18,347

Capital expenditures











2019

$
78


27


45


29


18

197

2018

64


40


31


27


32

194







31

The following table summarizes the reconciling items in the Other/Eliminations column for total EBIT for the periods presented:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
in millions
2019
2018
 
2019
2018
Items not allocated to segments:
 
 
 
 
 
Restructuring costs
$
(60
)
$
(44
)
 
$
(86
)
$
(188
)
Divestiture related transition costs
(11
)
—

 
(17
)
—

Brazil indirect tax credit
53

—

 
180

—

French antitrust settlement
—

(114
)
 
—

(114
)
Impairment of goodwill and intangibles
—

(747
)
 
—

(747
)
Legacy product warranty and liability expense

(12
)
—

 
(12
)
—

Loss on disposal of businesses
(79
)
—

 
(79
)
—

Corporate expenses and other
(45
)
(39
)
 
(90
)
(81
)
Total other/eliminations
$
(154
)
$
(944
)
 
$
(104
)
$
(1,130
)

A reconciliation of our segment information for total EBIT to the corresponding amounts in the Consolidated Condensed Statements of Comprehensive Income is shown in the table below for the periods presented:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
in millions
 
2019
2018
 
2019
2018
Operating profit
 
$
191

$
(472
)
 
$
454

$
(329
)
Interest and sundry (income) expense
 
(63
)
90

 
(193
)
82

Total EBIT
 
$
254

$
(562
)
 
$
647

$
(411
)
Interest expense
 
52

47

 
103

89

Income tax expense (benefit)
 
130

30

 
(2
)
45

Net earnings (loss)
 
$
72

$
(639
)
 
$
546

$
(545
)
Less: Net earnings available to noncontrolling interests
 
5

18

 
8

18

Net earnings available to Whirlpool
 
$
67

$
(657
)
 
$
538

$
(563
)

(16)    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 closed the sale of Embraco. Based on the cash purchase price, we estimate a gain, net of taxes, in the range of approximately $375 to $425 million. With the proceeds from this transaction, we will repay the outstanding term loan amount recorded in notes payable of approximately $1 billion as required under the Term Loan Agreement. The recognition of the gain and repayment of the outstanding term loan will occur in the third quarter of 2019.

The estimated gain is subject to change based on the final transaction amounts, including the net book value of held for sale assets at the closing date and the finalization of the amounts for closing costs, taxes and customary adjustments for indebtedness, cash and working capital. Please see "Embraco Sale Transaction" in the Management's Discussion and Analysis section for additional information on the agreement.
Embraco is reported within our Latin America reportable segment and meets the criteria for held for sale accounting. The operations of Embraco do not meet the criteria to be presented as discontinued operations.




32

The carrying amounts of the major classes of Embraco's assets and liabilities at June 30, 2019 and December 31, 2018 include the following:

Millions of dollars
June 30, 2019

December 31, 2018
Accounts receivable, net of allowance of $2 and $8, respectively
232

 
198

Inventories
234

 
165

Prepaid and other current assets
30

 
42

Property, net of accumulated depreciation of $532 and $616, respectively
386

 
364

Right of use assets
43

 
—

Other noncurrent assets
38

 
49

Total assets
$
963

 
$
818

 
 
 
 
Accounts payable
$
394

 
$
361

Accrued expenses
15

 
27

Accrued advertising and promotion
8

 
12

Other current liabilities
56

 
55

Lease liabilities
36

 
—

Other noncurrent liabilities
15

 
34

Total liabilities
$
524

 
$
489


The following table summarizes Embraco's earnings before income taxes for the periods presented:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Millions of dollars
2019
 
2018
 
2019
 
2018
Earnings before income taxes
$
24

 
$
9

 
$
47

 
$
16


South Africa Sale Transaction

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.

The South Africa business is reported within our EMEA reportable segment and meets the criteria for held for sale accounting. The operations of South Africa do not meet the criteria to be presented as discontinued operations.

We recorded a charge of $68 million in the Consolidated Condensed Statements of Comprehensive Income during the second quarter of 2019 associated with this transaction. The loss includes a charge of $35 million for the write-down of the assets of the disposal group to fair value and $33 million of cumulative foreign currency translation adjustments included in the carrying amount of the disposal group to calculate the impairment.

The carrying amount of held for sale assets and liabilities of South Africa as of June 30, 2019 is $6 million and $34 million, respectively. Held for sale liabilities primarily includes the cumulative foreign currency translation adjustments that will be released upon closing of the transaction which will result in substantial liquidation of this foreign entity.
Earnings before income taxes for South Africa were immaterial for the periods presented.
For additional information see Note 11 to the Consolidated Condensed Financial Statements.
Turkey Divestiture Costs
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 13 to the Consolidated Condensed Financial Statements.




33

(17) GOODWILL AND OTHER INTANGIBLES

Goodwill

In connection with the preparation of our Consolidated Condensed Financial Statements for three months ended June 30, 2018, we identified indicators of goodwill impairment for our EMEA reporting unit based on our qualitative assessment, which required us to complete an interim quantitative impairment assessment. The primary indicator of impairment for our EMEA reporting unit was the segment's continuing negative financial performance in 2018 that did not improve as anticipated, primarily driven by significant volume loss. The actual operating results for the three months ended June 30, 2018 were significantly lower than forecasted resulting in weak business performance. While the Indesit integration activities were substantially complete, as of the impairment date, the operating and macro-environment in the EMEA region continued to be very challenging and had not improved as anticipated. While our commercial transformation and supply chain initiatives were progressing, as of the impairment determination date, progress on market share recovery was slower than previously anticipated and the business had been impacted by raw material inflation and currency headwinds.

In performing our quantitative assessment of goodwill during the second quarter of 2018, we estimated the reporting unit's fair value under an income approach using a discounted cash flow model. The income approach used the reporting unit's projections of estimated operating results and cash flows that were discounted using a market participant discount rate based on the weighted-average cost of capital. The main assumptions supporting the cash flow projections included revenue growth, EBIT margins and the discount rate. The financial projections reflect management's best estimate of economic and market conditions over the projected period including forecasted revenue growth, EBIT margins, tax rate, capital expenditures, depreciation and amortization, changes in working capital requirements and the terminal growth rate.

Based on our interim quantitative impairment assessment as of June 30, 2018, the carrying value of the EMEA reporting unit exceeded its fair value by $579 million and we recorded a goodwill impairment charge in this amount in 2018.

Other Intangible Assets

In connection with the preparation of our Consolidated Condensed Financial Statements for three months ended June 30, 2018, we identified indicators of impairment associated with other intangible assets in our EMEA reporting unit based on our qualitative assessment, which required us to complete an interim quantitative impairment assessment. The primary indicator of impairment was the continuing decline in revenue from weaker volumes through the six months ended June 30, 2018 that did not improve as anticipated. The actual operating results for the three months ended June 30, 2018 were significantly lower than forecasted.

In performing our quantitative assessment of other intangible assets, primarily brands, we estimate the fair value using the relief-from-royalty method which requires assumptions related to projected revenues from our long-range plans; assumed royalty rates that could be payable if we did not own the brand; and a market participant discount rate based on a weighted-average cost of capital.

Based on our interim quantitative impairment assessment as of June 30, 2018, the carrying value of certain other intangible assets, including Indesit and Hotpoint*, exceeded their fair value, and we recorded an impairment charge of $168 million in 2018.

The estimated undiscounted cash flows for all other long-lived assets, excluding goodwill and indefinite-life intangibles, exceeded their carrying value as of June 30, 2018.

See Note 11 to the Consolidated Condensed Financial Statements for additional information on the fair value measurement and disclosure related to the goodwill and other intangibles impairment.






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


34

The estimates of future cash flows used in determining the fair value of goodwill and intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ materially from management's estimates due to changes in business conditions, operating performance and economic conditions.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ABOUT WHIRLPOOL
Whirlpool Corporation ("Whirlpool"), the world's leading major home appliance company, was incorporated in 1955 under the laws of Delaware and was founded in 1911. Whirlpool manufactures products in 14 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 $21 billion in annual sales and 92,000 employees in 2018. The world's leading major home appliance company claim is based on most recently available publicly reported annual revenues among leading appliance manufacturers.  
OVERVIEW

Whirlpool had strong second-quarter GAAP net earnings available to Whirlpool of $67 million, or $1.04 per share, compared to a GAAP net loss available to Whirlpool of $(657) million in the same prior-year period. Non-recurring items negatively impacted prior-year net loss available to Whirlpool by approximately $860 million.

Whirlpool delivered record second-quarter ongoing (non-GAAP) earnings per share of $4.01 and EBIT margin expansion of approximately 30 basis points, driven by strong results in North America, positive price/mix and sustained fixed cost discipline. These results were partially offset by continued cost inflation and increased brand investments.

In addition, we completed the sale of our Embraco business unit and will use the proceeds to pay down our outstanding term loan in the third quarter, making significant progress towards our long-term Gross Debt/EBITDA goal of 2.0.

Our second-quarter results strengthen our confidence in delivering on our full-year financial commitments of margin expansion and improved free cash conversion.













35

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
2019
 
2018
 
Better/(Worse)
 
2019
 
2018
 
Better/(Worse)
Units (in thousands)
16,249

 
16,120

 
0.8%
 
31,241

 
31,413

 
(0.5)%
Net sales
$
5,186

 
$
5,140

 
0.9
 
$
9,946

 
$
10,051

 
(1.0)
Gross margin
932

 
880

 
5.9
 
1,744

 
1,692

 
3.1
Selling, general and administrative
584

 
541

 
(8.1)
 
1,089

 
1,046

 
(4.3)
Restructuring costs
60

 
44

 
(37.0)
 
86

 
188

 
54.5
Interest and sundry (income) expense
(63
)
 
90

 
nm
 
(193
)
 
82

 
nm
Interest expense
52

 
47

 
(11.1)
 
103

 
89

 
(16.0)
Income tax expense (benefit)
130

 
30

 
nm
 
(2
)
 
45

 
nm
Net earnings (loss) available to Whirlpool
67

 
(657
)
 
nm
 
538

 
(563
)
 
nm
Diluted net earnings available to Whirlpool per share
$
1.04

 
$
(9.50
)
 
nm
 
$
8.35

 
$
(8.03
)
 
nm
nm = not meaningful
Consolidated net sales increased 0.9% and decreased 1.0% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The increase for the three months ended was primarily driven by favorable product price/mix and unit volume growth, partially offset by unfavorable impacts from foreign currency. The decrease for the six months ended was primarily driven by unfavorable impacts from foreign currency and unit volume declines, partially offset by favorable product price/mix. Excluding the impact of foreign currency, consolidated net sales increased 3.5% and 2.3% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.
For additional information regarding non-GAAP financial measures including 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 increased to 18.0% and 17.5% for the three and six months ended June 30, 2019 , respectively, compared to the same periods in 2018, which reflects favorable product price/mix, partially offset by lower unit volumes, raw material inflation and impact of foreign currency.
Our reportable operating segments are based upon geographical region and are defined as North America, EMEA, Latin America and Asia. 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 15 to the Consolidated Condensed Financial Statements.
The following is a discussion of results for each of our operating segments.


36

North America

Following are the results for the North America region:
CHART-F6EA8406E07D524B921.JPG
CHART-403F990A678656959B8.JPG
CHART-197080598F565D12912.JPG



 





2019 compared to 2018
Units sold decreased 1.1% and 4.0% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.







2019 compared to 2018
Net sales increased 2.8% and 1.8% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The increase for the three and six months ended June 30, 2019 was primarily driven by favorable impacts from product price/mix, partially offset by lower unit volumes. Excluding the impact from foreign currency, net sales increased 3.0% and 2.1% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.






2019 compared to 2018
EBIT margin was 12.4% and 12.3% for the three and six months ended June 30, 2019, respectively, compared to 11.9% and 11.7% for the same periods in 2018. EBIT increased for the three and six months ended June 30, 2019 compared to the same periods in 2018 primarily due to the favorable impact of product price/mix, partially offset by cost inflation (raw materials, tariffs and freight) and lower unit volumes.







37

EMEA

Following are the results for the EMEA region:
CHART-9B251ADD66435661B5A.JPG
CHART-6F1A308CF2F25721925.JPG
CHART-AA92277262E95339B3D.JPG

 




2019 compared to 2018
Units sold increased 2.0% and 3.3% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.









2019 compared to 2018
Net sales decreased 5.8% and 5.9% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The decrease for the three months ended June 30, 2019 was primarily driven by unfavorable impacts from foreign currency and product price/mix, partially offset by unit volume growth. The decrease for the six months ended June 30, 2019 was primarily driven by unfavorable impacts from foreign currency and product price/mix, partially offset by unit volume growth. Excluding the impact from foreign currency, net sales decreased 0.2% and increased 0.7% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.






2019 compared to 2018
EBIT margin was (1.6)% and (1.8)% for the three and six months ended June 30, 2019, respectively, compared to (2.3)% and (2.4)% for the same periods in 2018. EBIT increased for the three and six months ended June 30, 2019 compared to the same periods in 2018 primarily due to the favorable impacts of restructuring benefits.






38

Latin America

Following are the results for the Latin America region:
CHART-428910B2E991503D969.JPG
CHART-770FB5869DE554BC92E.JPG
CHART-A85B21DACA395DA0A91.JPG


 









2019 compared to 2018
Units sold increased 1.7% and 3.8% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.






2019 compared to 2018
Net sales increased 4.1% and 0.7% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The increase for the three and six months ended June 30, 2019 was primarily driven by favorable impacts from product price/mix and unit volume growth, partially offset by unfavorable impacts from foreign currency. Excluding the impact from foreign currency, net sales increased 9.6% and 8.1% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.





2019 compared to 2018
EBIT margin was 6.3% and 5.7% for the three and six months ended June 30, 2019, respectively, compared to 3.8% and 5.1% for the same periods in 2018. The favorable impacts of product price/mix were partially offset by the unfavorable impact of foreign currency. Prior period results were negatively impacted by the Brazil truck drivers' strike.





39

Asia

Following are the results for the Asia region:
CHART-079EC7D56A2D5791BC9.JPG
CHART-FF72CBCF48525F338E2.JPG
CHART-B0A8A44B04CF5860A02.JPG

 








2019 compared to 2018
Units sold increased 2.3% and decreased 3.9% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.






2019 compared to 2018
Net sales increased 0.5% and decreased 8.6% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. For the three months ended June 30, 2019 net sales was comparable to the prior year and includes the favorable impacts of unit volume growth in India and product price/mix offset by the unfavorable impact of foreign currency. The decrease for the six months ended June 30, 2019 was primarily driven by unfavorable impacts from lower unit volumes in China and foreign currency. Excluding the impact from foreign currency, net sales increased 4.7% and decreased 3.6% for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.




2019 compared to 2018
EBIT margin was 3.6% and 2.8% for the three and six months ended June 30, 2019 compared to 10.1% and 7.1% for the same periods in 2018. The favorable impact of unit volume growth in India and product price/mix was offset by the unfavorable impact of lower unit volumes and brand investments in China. Prior period results were positively impacted by Chinese government incentives.



40

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
 
2019
 
As a %
of Net Sales
2018
 
As a %
of Net Sales
2019
 
As a %
of Net Sales
2018
 
As a %
of Net Sales
North America
 
$227
 
7.9%
 
$206
 
7.4%
 
$403
 
7.5%
 
$367
 
6.9%
EMEA
 
126
 
12.2%
 
139
 
12.7%
 
250
 
12.3%
 
282
 
13.0%
Latin America
 
90
 
10.1%
 
84
 
9.8%
 
168
 
9.5%
 
170
 
9.7%
Asia
 
75
 
17.5%
 
64
 
14.8%
 
136
 
17.0%
 
127
 
14.5%
Corporate/other
 
66
 
—
 
48
 
—
 
132
 
—
 
100
 
—
Consolidated
 
$584
 
11.3%
 
$541
 
10.5%
 
$1,089
 
11.0%
 
$1,046
 
10.4%
Consolidated selling, general and administrative expenses for the three and six months ended June 30, 2019 increased compared to the same period in 2018 due to brand investments.
Restructuring
We incurred restructuring charges of $60 million and $86 million for the three and six months ended June 30, 2019, respectively, compared to $44 million and $188 million for the same periods in 2018. For the full year 2019, we expect to incur approximately $200 million of restructuring charges, as we reduce fixed costs primarily in the EMEA region.
For additional information, see Note 13 to the Consolidated Condensed Financial Statements.
Impairment of Goodwill and Other Intangibles
We recorded an impairment charge of $747 million related to goodwill ($579 million) and other intangibles ($168 million) for the three and six months ended June 30, 2018 related to the EMEA reporting unit.
For additional information, see Note 11 and Note 17 to the Consolidated Condensed Financial Statements.
Loss on Disposal of Businesses
We incurred a loss of $79 million for the three and six months ended June 30, 2019 related to charges on the pending 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 16 to the Consolidated Condensed Financial Statements.
Interest and Sundry (Income) Expense
Interest and sundry (income) expense for the three and six months ended June 30, 2019 increased compared to the same periods in 2018. The increase in sundry income for the three and six months ended was primarily due to Brazil indirect tax credits 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 8 to the Consolidated Condensed Financial Statements.
Interest Expense
Interest expense for the three and six months ended June 30, 2019 increased compared to the same periods in 2018 primarily due to higher average short-term debt balances.





41

Income Taxes
Income tax expense (benefit) was $130 million and $(2) million for the three and six months ended June 30, 2019 compared to income tax expense of $30 million and $45 million in the same periods of 2018. For the three months ended June 30, 2019, the increase in the effective tax rate from the prior period is due primarily to a higher level of earnings and related tax expense and impact of changes in enacted tax rates. For the six months ended June 30, 2019, the decrease in the effective tax rate from the prior period is due to valuation allowance releases, partially offset by higher level of earnings and related tax expense, non-deductible impairments and government payments.
For additional information, see Note 14 to the Consolidated Condensed Financial Statements.
FINANCIAL CONDITION AND LIQUIDITY
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 potential acquisitions.
Our short-term potential uses of liquidity include funding our ongoing capital spending, restructuring activities and returns to shareholders. We also have $573 million of long-term debt maturing in the next twelve months, and are currently evaluating our options in connection with this maturing debt, which may include repayment through refinancing, free cash flow generation, or cash on hand.
At June 30, 2019, we have $2,157 million of notes payable which consist of short-term borrowings payable to banks and commercial paper, which are generally used to fund working capital requirements. For additional information, see Note 7 to the Consolidated Condensed Financial Statements.
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.
At June 30, 2019, we had cash or cash equivalents greater than 1% of our consolidated assets in China and Brazil, which represented 2.2% and 1.4%, 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, with the exceptions of Italy, which represented 1.1%. We continue to monitor general financial instability and uncertainty globally.
The Company had cash and cash equivalents of approximately $1.2 billion at June 30, 2019, of which substantially all was held by subsidiaries in foreign countries. 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 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 practical to estimate the amount of the deferred tax liability associated with the repatriation of cash due to the complexity of its hypothetical calculation.

We continue to review customer conditions globally. At June 30, 2019, we had 280 million reais (approximately $73 million) 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, 2019, we have 129 million reais (approximately $34 million) of insurance against this credit risk through policies purchased from high-quality underwriters.
For additional information on guarantees, see Note 8 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").


42


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 $1.08 billion, with final purchase price amounts subject to customary post-closing working capital and indebtedness adjustments. Whirlpool has agreed to retain certain liabilities relating to tax, environmental, labor and products following closing of the Transaction.
For additional information on the Transaction, see Note 16 to the Consolidated Condensed Financial Statements.
Share Repurchase Program
For additional information about our share repurchase program, see Note 12 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
 
2019
 
2018
Cash provided by (used in):
 
 
 
 
Operating activities
 
$
(821
)
 
$
(584
)
Investing activities
 
(195
)
 
(109
)
Financing activities
 
678

 
569

Effect of exchange rate changes
 
9

 
(42
)
Net change in cash, cash equivalents and restricted cash
 
$
(329
)
 
$
(166
)
Cash Flows from Operating Activities
Cash used in operating activities during the six months ended June 30, 2019 increased compared to the same period in 2018, which primarily reflects the planned FCA settlement payment and temporarily higher working capital.
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, 2019 increased compared to the same period in 2018, which primarily reflects proceeds related to held-to-maturity securities (approximately $60 million) in 2018.
Cash Flows from Financing Activities
Cash provided by financing activities during the six months ended June 30, 2019 increased compared to the same period in 2018, which primarily reflects higher repayments of long-term debt (approximately $570 million), lower proceeds from borrowings of short-term and long-term debt (decrease of approximately $280 million) and lower stock repurchases under our share repurchase program due to the 2018 modified Dutch auction tender offer (decrease of approximately $950 million).
Dividends paid in financing activities during the six months ended June 30, 2019 was comparable to the same period in 2018.





43

Financing Arrangements
The Company had total committed credit facilities of approximately $3.6 billion at June 30, 2019. The facilities are geographically diverse and reflect the Company's growing global operations. The Company believes these facilities are sufficient to support its global operations. We had no borrowings outstanding under the committed credit facilities at June 30, 2019 or December 31, 2018.
We anticipate amending the Amended Long-Term Facility in the near term to increase borrowing capacity and extend its duration.
For additional information about our financing arrangements, see Note 7 to the Consolidated Condensed Financial Statements.
Dividends
In April 2019, our Board of Directors approved a 4.3% increase in our quarterly dividend on our common stock to $1.20 per share from $1.15 per share.
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, 2019, we had approximately $333 million outstanding under these agreements.
For additional information about our off-balance sheet arrangements, see Notes 7 and 8 to the Consolidated Condensed Financial Statements.
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
•
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 for 2019 and 2018. Ongoing EBIT margin is calculated by dividing ongoing EBIT by net sales for 2019 and 2018. 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. 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


44

earnings available to Whirlpool 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.
Ongoing Earnings Before Interest & Taxes (EBIT) Reconciliation:
in millions

Three Months Ended
 
Six Months Ended
2019
2018
 
2019
2018
Net earnings (loss) available to Whirlpool
$
67

$
(657
)
 
$
538

$
(563
)
Net earnings available to noncontrolling interests
5

18

 
8

18

Income tax expense (benefit)
130

30

 
(2
)
45

Interest expense
52

47

 
103

89

Earnings (loss) before interest & taxes
$
254

$
(562
)
 
$
647

$
(411
)
Restructuring expense
60

44

 
86

188

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

—

French antitrust settlement
—

114

 
—

114

Impairment of goodwill and other intangibles
—

747

 
—

747

Ongoing EBIT
$
363

$
343

 
$
661

$
638

Free Cash Flow (FCF) Reconciliation:
in millions
Six Months Ended
2019
2018
Cash used in operating activities
$
(821
)
$
(584
)
Capital expenditures
(197
)
(194
)
Proceeds from sale of assets and business
5

27

Change in restricted cash (1)
16

26

Free cash flow
$
(997
)
$
(725
)
 
 
 
Cash used in investing activities
$
(195
)
$
(109
)
Cash provided by financing activities
$
678

$
569

(1) For additional information regarding restricted cash, see Note 4 to the Consolidated Condensed Financial Statements.


45

FORWARD-LOOKING PERSPECTIVE
Earnings per diluted share presented below are net of tax, while each adjustment is presented on a pre-tax basis. The aggregate income tax impact of the taxable components of each adjustment is presented in the income tax impact line item at our anticipated 2019 full-year adjusted tax rate between 15% and 20%. We currently estimate earnings per diluted share and industry demand for 2019 to be within the following ranges:
 
2019
 
Current Outlook
Estimated earnings per diluted share, for the year ending December 31, 2019
$17.80
—
$18.55
Including:
 
 
 
Restructuring expense
$(3.11)
Brazil indirect tax credit
2.79
Divestiture related transition costs
(0.49)
Loss on disposal of businesses
(1.23)
Legacy product warranty and liability expense
(0.19)
Gain on sale of business
7.76
Income tax impact
(0.97)
Normalized tax adjustment
(1.52)
 
 
 Industry demand
 
North America
(2)%
—
—%
EMEA
(1)%
—
1%
Latin America
~ 5%
Asia
1%
—
2%
For the full-year 2019, we continue to expect to generate cash from operating activities of approximately $1.4 billion and free cash flow of approximately $800 million, including restructuring cash outlays of up to $200 million and capital expenditures of approximately $625 million.
The table below reconciles projected 2019 cash provided by operating activities determined in accordance with GAAP to free cash flow, a non-GAAP measure. Management believes that free cash flow provides stockholders with a relevant measure of liquidity and a useful basis for assessing Whirlpool's ability to fund its activities and obligations. There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similarly named non-GAAP measures whose calculations may differ from our calculations. We define free cash flow as cash provided by operating activities less capital expenditures and including proceeds from the sale of assets/businesses, and changes in restricted cash. The 2019 free cash flow outlook excludes the net proceeds from the sale of the Embraco business. The change in restricted cash relates to the private placement funds paid by Whirlpool to acquire majority control of Whirlpool China (formerly Hefei Sanyo) in 2014 and which are used to fund capital and technical resources to enhance Whirlpool China's research and development and working capital, as required by the terms of the Hefei Sanyo acquisition completed in October 2014. For additional information regarding non-GAAP financial measures, see the Non-GAAP Financial Measures section of this Management's Discussion and Analysis.
 
2019
Millions of dollars
Current Outlook
Cash provided by operating activities (1)
~ 1,425
Capital expenditures, proceeds from sale of assets/businesses and changes in restricted cash
(625)
Free cash flow
~ 800
(1) Financial guidance on a GAAP basis for cash provided by (used in) financing activities and cash provided by (used in) investing activities has not been provided because in order to prepare any such estimate or projection, the company would need to rely on market factors and certain other conditions and assumptions that are outside of its control.
The projections above are based on many estimates and are inherently subject to change based on future decisions made by management and the Board of Directors of Whirlpool, and significant economic, competitive and other uncertainties and contingencies.


46

OTHER MATTERS
For additional information regarding certain of our loss contingencies/litigation, see Note 8 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 2018 or the six months ended June 30, 2019. 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 second year of the remedy, beginning February 7, 2019, the remedy imposes an 18% tariff on the first 1.2 million large residential washing machines imported into the United States and a 45% tariff on such imports in excess of 1.2 million, and also imposes a 45% tariff on washer tub, drum, and cabinet imports in excess of 70,000 units. The tariff rates on washers and covered parts will decline slightly during the third year of the remedy. The safeguard remedy is subject to an interim review by the International Trade Commission during 2019.
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 was a component of increased raw material costs during the quarter ended June 30, 2019. We expect these and other tariffs to impact material 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.
Post-Retirement Benefit Litigation
For additional information regarding post-retirement benefit litigation, see Note 9 to the Consolidated Condensed Financial Statements.


47

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our exposures to market risk since December 31, 2018.
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, 2019. 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, 2019.
(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.



48

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 8 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, 2018.
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, 2019, we repurchased 360,326 shares under this share repurchase program at an aggregate price of approximately $50 million. At June 30, 2019, there were approximately $750 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, 2019:
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, 2019 through April 30, 2019
—

$
—

—

$
750

May 1, 2019 through May 31, 2019
—

$
—

—

$
750

June 1, 2019 through June 30, 2019
—

$
—

$
—

$
750

       Total
—

$
—

—

 
Share repurchases are made from time to time on the open market as conditions warrant. These programs do not obligate us to repurchase any of our shares and they have no expiration date.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
None.


49

ITEM 6.
EXHIBITS
Exhibit 2.1*
 
 
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
XBRL Taxonomy Extension Schema Document
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
* Schedules (or similar attachments) to the Amendment to Purchase Agreement have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish supplementally copies of such omitted schedules (or similar attachments) to the Securities and Exchange Commission upon request.


50

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, 2019



51


EXHIBIT 2.1
EXECUTION VERSION

First Amendment to the Share Purchase Agreement, dated as of April 24, 2018 (the “Purchase Agreement”), dated as of May 3, 2019, by and among:
(1)
Nidec Corporation, a corporation organized under the laws of Japan (“Buyer”),
(2)
Whirlpool Corporation, a Delaware corporation (“Seller”), and
(3)
each of the Press Sellers, as such term is modified by this Amendment,
collectively, the “Parties”.
Capitalized terms used herein without definition are defined in the Purchase Agreement.
W I T N E S S E T H :
Whereas:
(A)
Buyer, Seller and each of the Press Sellers are party to the Purchase Agreement;
(B)
Pursuant to the Purchase Agreement, the Parties agreed that: (i) the Elected Italian Assets and the Italian Distribution Business Employees would be further defined; (ii) any proposed amendments to the Restructuring Plan would be negotiated in good faith with a view to optimizing value to each of Buyer and its Affiliates, on the one hand, and Seller and its Affiliates, on the other hand; and (iii) the Micro Plan would be developed by Seller, in consultation with Buyer, setting forth in reasonable detail the steps and transactions in furtherance of implementation of the Restructuring Plan and Seller’s obligations set forth in Section 5.1.5(v) thereof;
(C)
The Restructuring Plan attached to the Purchase Agreement does not specify the purchasing entities in respect of the Press Shares and sets forth a deal structure pursuant to which, inter alia:
a.
Buyer is to acquire shares in a new holding company to be formed in Hong Kong; and
b.
Buyer is to acquire the Press Business located in Mexico through acquiring shares in Embraco Luxembourg;
(D)
The Parties want to revise certain elements of the acquisition structure by changing the Restructuring Plan to:
a.
provide that Nidec Europe, a wholly-owned Subsidiary of Buyer, will acquire the equity interests in BESCO and EECON;
b.
(i) acknowledge that Seller has caused Embraco Luxembourg to undergo a migration to a Delaware limited liability company, to be renamed Embraco NA Manufacturing LLC (“Embraco US”) and completed all other steps set forth in Step 1 of Phase I of the Restructuring Plan (together, the “Luxembourg Migration”, and the term “Embraco US” shall mean Embraco Luxembourg following the effectiveness of the Luxembourg Migration) and (ii) provide that Nidec Motor Corporation, a wholly-owned subsidiary of Buyer, will acquire the membership interests in Embraco US; and
c.
provide that the purchasing entities in respect of the Press Shares are specified;
(E)
The Parties have reached agreement with respect to the Elected Italian Assets, the Italian Distribution Business Employees, the Restructuring Plan (including with respect to the purchasing entities of the Press Shares and the deal structure in China, Luxembourg and Mexico), the Micro Plan, the Purchase Price Allocation and the Final Allocation and certain other matters related thereto and want to amend the Purchase Agreement as set forth in this Amendment; and



(F)
The Parties have reached agreement with respect to: (i) an estimated Closing Balance Sheet prepared on the basis of the Accounting Principles; (ii) estimated Transaction Expenses; (iii) estimated Closing Cash on Hand; (iv) estimated Working Capital as of the close of business on the Closing Date (without giving effect to the transactions contemplated hereby); (v) estimated Closing Indebtedness; (vi) the estimated Restructuring Fee; (vii) the BSH Amount and, based thereon, (vii) the amount to be paid at Closing, in each case related to the Press Business. The amount to be paid at Closing is $1,130,727,806.
Now, therefore, in consideration of the mutual promises and covenants set forth below and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:
Modification of Terms
For purposes of this Amendment and the Purchase Agreement, as amended by this Amendment, the term “Agreement” shall refer to the Purchase Agreement as amended hereby and from time to time.
1
Article 1
1.1
Section 1.1 of the Purchase Agreement is hereby amended by adding the following defined terms in appropriate alphabetical order:
““Amendment” means this First Amendment to the Share Purchase Agreement, dated as of May 3, 2019, by and among the Parties.”
““BESCO” means Beijing Embraco Snowflake Compressor Company Ltd.”
““BESCO License Date” means the date on which the BESCO Operating License is issued and effective on substantially similar terms on which BESCO held such license on the day immediately prior to such date.”
““BESCO Operating License” means the new Business License (营ª业µ执´照Õ) of BESCO issued by SAMR to BESCO which marks the completion of the change registration with SAMR (see (ii) of BESCO Regulatory Approval).”
““BESCO Regulatory Approval” means (i) the change filing with the authorized local office of the Ministry of Commerce of the People’s Republic of China at the place of incorporation of BESCO and (ii) the change registration with the authorized local offices of State Administration for Market Regulation of the People’s Republic of China at the place of incorporation of BESCO (“SAMR”), with respect to the equity transfer contemplated under Section 2.2.2(iv), and, effective upon the Closing Date, the change of the directors, general managers and supervisors of BESCO (a list of which is set out in Schedule 2.2.2(iv)(A)) to the directors, general managers and supervisors nominated or appointed by Buyer.”
““BESCO Seller Leakage” means:
(i) any dividend, distribution or payments of any nature declared, paid or made on or prior to the BESCO License Date by BESCO to Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary);



(ii) any payments made or agreed to be made or any assets transferred or agreed to be transferred by BESCO to Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary);
(iii) any liabilities assumed, indemnified or incurred or agreed to be assumed, indemnified or incurred by BESCO for the benefit of Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary);
(iv) the waiver or agreement to waive by BESCO of any amount owed to such entity by Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary); or
(v) any agreement or arrangement by or on behalf of BESCO to give effect to any of the matters referred to in (i) to (iv) above,
but does not include any BESCO Seller Permitted Leakage.”
““BESCO Seller Permitted Leakage” means any matter undertaken by or on behalf of BESCO at the written request of Buyer and any amounts paid or payable pursuant to a Contract entered into between BESCO and any Affiliate of Seller or pursuant to a valid judgment or arbitral award.”
““BSH Amount” means an amount equal to three million euros (EUR 3,000,000).”
““Chinese Tax Amount” has the meaning given in Section 10.1.5.”
““Chinese Tax Filings” means the tax reporting package(s) required to be filed with the appropriate Taxing Authorities of the People’s Republic of China in respect of the reporting of Chinese Tax Amount (if any) that may be due on the China-related transactions contemplated by this Agreement. For the avoidance of doubt, Chinese Tax Filings do not include any Chinese stamp duty filings required to be filed with a Governmental Authority.”
““EECON License Date” means the date on which the EECON Operating License is issued and effective on substantially similar terms on which EECON held such license on the day immediately prior to such date.”
““EECON Operating License” means the new Business License (营ª业µ执´照Õ) of EECON issued by SAMR to EECON which marks the completion of the change registration with SAMR (see (ii) of EECON Regulatory Approval).”
““EECON Regulatory Approval” means (i) the change filing with the authorized local office of the Ministry of Commerce of the People’s Republic of China at the place of incorporation of EECON and (ii) the change registration with the authorized local offices of State Administration for Market Regulation of the People’s Republic of China at the place of incorporation of EECON (“SAMR”), with respect to the equity transfer contemplated under Section 2.2.2(iv), and, effective upon the Closing Date, the change of the directors, general managers and supervisors of EECON (a list of which is set out in Schedule 2.2.2(iv)(B)) to the directors, general managers and supervisors nominated or appointed by Buyer.”
““EECON Seller Leakage” means:



(i) any dividend, distribution or payments of any nature declared, paid or made on or prior to the EECON License Date by EECON to Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary);
(ii) any payments made or agreed to be made or any assets transferred or agreed to be transferred to Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary);
(iii) any liabilities assumed, indemnified or incurred or agreed to be assumed, indemnified or incurred by EECON for the benefit of Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary);
(iv) the waiver or agreement to waive by EECON of any amount owed to such entity by Seller, any Press Seller or any Affiliate of Seller or any Press Seller (other than a Transferred Press Subsidiary); or
(v) any agreement or arrangement by or on behalf of EECON to give effect to any of the matters referred to in (i) to (iv) above,
but does not include any EECON Seller Permitted Leakage.”
““EECON Seller Permitted Leakage” means any matter undertaken by or on behalf of EECON at the written request of Buyer and any amounts paid or payable pursuant to a Contract entered into between EECON and any Affiliate of Seller or pursuant to a valid judgment or arbitral award.”
““Embraco Mexico” means Embraco Mexico, S. de R.L. DE C.V.”
““Embraco Servicios” means Embraco Mexico Servicios, S. de R.L. de C.V.”
““Embraco US” has the meaning given in the recitals to this Amendment.”
““Final Mid-Month Adjustment Amount” means the Mid-Month Adjustment Amount, as finally determined in accordance with Section 2.3.4.”
““Luxembourg Migration” has the meaning given in the recitals to this Amendment.”
““Mid-Month Adjustment Amount” means (i) (x) the Monthly Profit multiplied by (y) a fraction, the numerator of which is (A) the number of calendar days from the first day of the month through and including the Closing Date and the denominator of which is (B) the number of days of such calendar month (it being understood such amount could be positive or negative) minus (ii) to the extent not taken into account in Monthly Profit, any dividends or other distributions declared or paid during such calendar month by any Transferred Press Subsidiary to Seller or any Press Seller.”
““Monthly Profit” means (i) the after-Tax profit of the Press Business for the calendar month in which the Closing occurs as reflected on a consolidated standalone income statement of the Press Business derived from the statutory accounts of the Press Business for such month, prepared in accordance with the Accounting Principles, plus (ii) any adjustment required by Section 5.2.9.”
““Nidec Europe” means Nidec Europe B.V.”



““Reference Date” means the last calendar day of the month prior to the month in which the Closing Date occurs.”
““Restructuring Fee” means an amount equal to sum of (i) fifty percent (50%) of the reasonable out-of-pocket tax consulting expenses and legal fees paid by Seller and its Affiliates for the tax and legal analysis for the revisions to the Restructuring Plan as set forth in this Amendment (excluding the revisions to the Restructuring Plan with respect to the Luxembourg Migration) and (ii) one hundred percent (100%) of (1) the reasonable out-of-pocket tax consulting expenses and legal fees paid by Seller and its Affiliates for the tax and legal analysis for the revisions to the Restructuring Plan as set forth in this Amendment with respect to the Luxembourg Migration, (2) the reasonable out-of-pocket expenses paid by Seller and its Affiliates to implement the Luxembourg Migration, (3) the out-of-pocket expenses for third-party warehouses and additional freight costs paid by Seller and its Affiliates for implementation of the Luxembourg Migration and (4) any actual losses in operations, production or sales related to the risks identified by Seller to Buyer prior to the date hereof in connection with the implementation of the Luxembourg Migration (provided, however, for the avoidance of doubt, the Parties agree such actual losses, as of the date hereof, are zero). The estimated restructuring fee for the foregoing clause (i) and (ii) to be used for purpose of calculating the Estimated Purchase Price is one million four hundred thousand US dollars ($1,400,000). Seller shall provide sufficient evidence with respect to the calculation of such fees to the Buyer within thirty (30) Business Days after the Closing for purpose of adjusting and calculating the Final Purchase Price.”
““Riva Property” means the real property owned by Italy NewCo located at via Pietro Andriano no. 12, Riva Presso Chieri (TO), Italy, cadastral data: sheet no. 7, parcel 2, sub 113 and sheet 13 no. 87 sub.17 "graffati" - floors S1-T-1 - cat. D/8.”
““Riva Property Contribution Agreement” means the deed of contribution of the distribution line of business from Embraco Europe to Italy NewCo, executed as a deed on November 28, 2018 (Rep. 75.344 - Coll. 11.852) and registered with the Turin Register of the Companies ("Registro Imprese di Torino").”
1.3
Section 1.1 of the Purchase Agreement is hereby amended by deleting the following defined terms:

““HK NewCo” means a new holding company to be formed in Hong Kong pursuant to the Restructuring Plan.”
““Up Points” has the meaning given in Part C of Annex A.”
2.3
Section 1.1 of the Purchase Agreement is hereby amended by amending and restating the following defined terms to read as follows:

““Closing Cash on Hand” means, as of the close of business on the Reference Date (without giving effect to the transactions contemplated hereby), the aggregate amount of Cash, as determined in accordance with the Accounting Principles, other than Trapped Cash; provided, however, notwithstanding the foregoing, Closing Cash on Hand shall (i) be reduced by the amount of any checks and drafts issued by



Transferred Press Subsidiaries and uncleared by the bank as of close of business on the Reference Date, and (ii) shall include the amount of any checks and drafts received or deposited for the account of the Transferred Press Subsidiaries and not credited to the account of the relevant Transferred Press Subsidiary as of close of business on the Reference Date.”
““Closing Indebtedness” means, as of the close of business on the Reference Date (without giving effect to the transactions contemplated hereby), the aggregate amount of Indebtedness of the Transferred Press Subsidiaries, as determined in accordance with the Accounting Principles; provided that Closing Indebtedness shall exclude Indebtedness solely among the Transferred Press Subsidiaries.”
““Current Assets” means the current assets of the Transferred Press Subsidiaries as of the close of business on the Reference Date (without giving effect to the transactions contemplated hereby) set out in Appendix A that are stated to be included in Final Working Capital, as determined in accordance with the Accounting Principles, subject to adjustments as of the close of business on the Reference Date corresponding to the adjustments footnoted to Appendix A.
““Current Liabilities” means the current liabilities of the Transferred Press Subsidiaries as of the close of business on the Reference Date (without giving effect to the transactions contemplated hereby) set out in Appendix A that are stated to be included in Final Working Capital, as determined in accordance with the Accounting Principles, subject to adjustments as of the close of business on the Reference Date corresponding to the adjustments footnoted to Appendix A.”
““Elected Italian Assets” means those items set forth on Schedule 1.6.”
““Final Working Capital” means the amount of Working Capital as of the close of business on the Reference Date (without giving effect to the transactions contemplated hereby), as finally determined in accordance with Section 2.3.4.”
““Italy NewCo” means Embraco Eurosales s.r.l., a limited liability company organized under the laws of Italy pursuant to the Restructuring Plan.”
2
Article 2
2.2
The first paragraph of Section 2.2 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“The closing of the sale and purchase of the Press Shares (the “Closing”) shall take place at the offices of Linklaters LLP, 1345 Avenue of the Americas, New York, New York, at 10:00 a.m. Eastern (Daylight) time, on the date that is the third (3rd) Business Day after the conditions set forth in Article 7 have been satisfied or, to the extent permitted by Law, waived by the party entitled to waive such conditions (other than conditions that, by their terms, are to be satisfied at Closing but subject to the satisfaction or, to the extent permitted by Law, waiver by the party entitled to do so of such conditions), or on such other date as the Parties may agree to in writing (the “Closing Date”); provided, however, if commercial banks in Amsterdam, Luxembourg, Milan or Sao Paulo are authorized or required to be closed on such date, the Closing Date shall be the next Business Day. At Closing:”



2.2
Section 2.2.1 of the Purchase Agreement is hereby amended and restated in its entirety as follows:
“each Press Seller shall execute and/or deliver, or cause to be executed and/or delivered, to Buyer’s Affiliates any required Local Agreements to effect the following:
i.
Italy the acquisition by Nidec Europe, of 100% of the corporate capital of Italy NewCo;
ii.
Slovakia the acquisition by Nidec Europe, of 99.9967% of the shares in Embraco Slovakia and the acquisition by Buyer of 0.0033% of the shares in Embraco Slovakia (corresponding to a contribution to registered capital of Embraco Slovakia equal to EUR 996);
iii.
Russia the acquisition by Nidec Europe of 0.01% of the shares in Embraco Russia;  
iv.
China the acquisition, by Nidec Europe of: (a) 69.18% of the equity interests in BESCO; and (b) 100% of the equity interests in EECON;
v.
Brazil the acquisition by NIDEC GPM do Brasil Automotiva Ltda. of 99.99% of the quotas in Embraco Brazil and the acquisition by Buyer of 0.01% of the quotas in Embraco Brazil;
vi.
Uruguay the acquisition by Nidec Motor Corporation of 100% of the shares in Ealing Compañia de Gestiones y Participaciones S.A.; and
vii.
United States the acquisition by Nidec Motor Corporation of 100% of the membership interests of Embraco US.”
2.3
Section 2.2.2 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“each Press Seller shall execute and/or deliver, or cause to be executed and/or delivered, to Buyer all certificates and documents necessary and take such steps as are required to transfer the Press Shares to Buyer and its Affiliates in accordance with this Agreement, including the Restructuring Plan. In furtherance of the foregoing, the relevant Press Seller shall do the following in relation to the Press Shares and Transferred Press Subsidiary incorporated or located in the jurisdictions listed below:
i.
Italy In relation to the quotas representing the entire corporate capital of Italy NewCo, the relevant Press Seller shall transfer title over such quotas to Nidec Europe through the execution, together with Nidec Europe, of a notarial deed of transfer of quotas. The notary who will notarize the deed of transfer shall be Ciro De Vivo.
ii.
Slovakia In relation to the participation interests of Embraco Slovakia, the relevant Press Seller shall deliver to the Buyer: (i) evidence of the filing of the petition to register the transfer of the participation interests with the commercial register in Slovakia, in the form of copies of an electronic message to the register with the registration petition and confirmation from the register that the petition is being processed with an assigned file number; (ii) an original or notarized copy of (a) an extract from the commercial register for Embraco Slovakia not older than three months; (b) an apostilled extract from the applicable trade register for such Press Seller, evidencing legal existence and authorization to act in the name of such Press Seller affixed with an official Slovak translation of the extract and the apostille; and (iii) if a third party will act as an attorney of such Press Seller, apostilled power of attorney with notarized signatures of the



grantor whose authorization to act in the name of such Press Seller is apparent from the extract under paragraph (ii) above affixed with an official Slovak translation of the power of attorney, notarization and the apostille.
iii.
Russia In relation to the shares of Embraco Russia, the relevant Press Seller shall transfer in favor of Nidec Europe all the participation interests owned by such Press Seller by executing a Russian law-governed participation interest transfer instrument, an offer document and a waiver of pre-emptive right before a Russian notary, and by doing any other things as are necessary to cause such transfer to be registered with the Russian Unified State Register of Legal Entities.
iv.
China In relation to the equity interests of:
A.
BESCO, the relevant Press Seller shall deliver to Nidec Europe: (i) board resolutions (as required by the articles of association of the relevant company) duly obtained by Whirlpool S.A. and Whirlpool Overseas Holdings, LLC approving the transfer of the equity interests from Whirlpool S.A. and Whirlpool Overseas Holdings, LLC respectively to Nidec Europe; (ii) removal letters to remove the existing directors, supervisors and general manager of BESCO and resignation letters for the individuals set forth on Schedule 2.2.2(iv)(A) in respect of BESCO; and (iii) the application documents required to be issued by the relevant Press Seller or its representatives or duly signed by the relevant Press Seller or its representatives in order to effect the BESCO Regulatory Approvals.
B.
EECON, the relevant Press Seller shall deliver to Nidec Europe: (i) shareholder resolutions or board resolutions (as required by the articles of association of the relevant company) duly obtained by Whirlpool S.A. approving the transfer of the equity interests from Whirlpool S.A. to Nidec Europe; (ii) removal letters to remove the existing directors, supervisors and general manager of EECON and resignation letters for the individuals set forth on Schedule 2.2.2(iv)(B) in respect of EECON; and (iii) the application documents required to be issued by the relevant Press Seller or its representatives or duly signed by the relevant Press Seller or its representatives in order to effect the EECON Regulatory Approvals.
v.
Brazil In relation to the quotas of Embraco Brazil, the Press Sellers shall cause Embraco Brazil to hold a quotaholders’ meeting in order to (a) approve the sale and transfer of all quotas of Embraco Brazil from Press Sellers to Buyer and, if applicable, waive preemptive rights for the purchase of the quotas, (b) amend the articles of association (Contrato Social) of Embraco Brazil to reflect the sale and transfer of all quotas, (c) approve the resignation of the current manager(s) of Embraco Brazil, who will grant to Embraco Brazil the most full, comprehensive, general, irrevocable and irreversible release for any claim or demand such manager(s) may have against Embraco Brazil whether now or in the future, in or out of courts, and (d) elect new manager(s) appointed by Buyer.
vi.
Uruguay In relation to the shares of Ealing Compañía de Gestiones y Participaciones S.A., the relevant Press Seller shall transfer in favor of Buyer all the share certificates



owned by such Press Seller, shall endorse and deliver such share certificates to Buyer, shall execute the Letter Requesting Recording of Share Transfer and update the share registry book to cause the name of Nidec Motor Corporation to be registered in the shareholders’ ledger of Ealing Compañía de Gestiones y Participaciones S.A. as owner of such shares.
vii.
United States In relation to the membership interests of Embraco US, the relevant Press Seller shall:
A.
have caused the Luxembourg Migration to be consummated and Embraco US to be validly organized, including by (a) filing in the office of the Secretary of State of the State of Delaware (i) a Certificate of Limited Liability Company Domestication and (ii) a Certificate of Formation, which, in the case of both of the foregoing clauses (a) and (b), shall be executed in accordance with the laws of the State of Delaware.
B.
transfer 100% of the membership interests in Embraco US to Nidec Motor Corporation by way of a membership interest transfer agreement in accordance with the terms of the operating agreement of Embraco US, duly executed between Whirlpool International Holdings S.à.r.l. as transferor and Nidec Motor Corporation as transferee.”
2.4
Section 2.2.7 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“each Press Seller shall deliver the written resignation of each of the individuals set forth on Schedule 2.2.2(iv)(A), Schedule 2.2.2(iv)(B) and Schedule 2.2.7 of the Transferred Press Subsidiaries from his or her office as set forth on such schedule, to take effect as of the Closing Date; and”
2.5
Section 2.2.9 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“In relation to BESCO and EECON, Buyer shall cause Nidec Europe to deliver to the relevant Press Sellers the application documents required to be issued by Nidec Europe or its representatives or duly signed by Nidec Europe or its representatives in order to effect the BESCO Regulatory Approvals and the EECON Regulatory Approvals.”

2.6
Section 2.3.1 of the Purchase Agreement is hereby amended by deleting the “and” placed directly before Section 2.3.1(v) and by adding the following clause as Section 2.3.1(vi):

“; and (vi) plus the Restructuring Fee.”
2.7
Section 2.3.2 of the Purchase Agreement is hereby amended by deleting the “and” placed directly before Section 2.3.1(v) and by adding the following clauses as Section 2.3.2(vi), 2.3.2(vii) and Section 2.3.2(viii):




“; (vi) plus the Restructuring Fee; (vii) minus the BSH Amount; and (viii) plus the Mid-Month Adjustment Amount.”
2.8
Section 2.3.3 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

"Seller has delivered to Buyer: (i) an estimated Closing Balance Sheet (the "Estimated Closing Balance Sheet") prepared on the basis of the Accounting Principles; (ii) its estimate of Transaction Expenses ("Estimated Transaction Expenses"); (iii) its estimate of Closing Cash on Hand ("Estimated Closing Cash on Hand"); (iv) its estimate of Working Capital as of the close of business on the Closing Date (without giving effect to the transactions contemplated hereby) ("Estimated Working Capital"); (v) its estimate of Closing Indebtedness ("Estimated Closing Indebtedness"); (vi) the Restructuring Fee; and, based thereon, (viii) its calculation of the Estimated Purchase Price, each of which shall be conclusive for purposes of the purchase price adjustment in Section 2.5."
2.9
Section 2.3.4 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“As promptly as reasonably practicable following the Closing Date, but no later than 30 days after the Closing Date, Buyer shall complete a physical inventory of the Press Business as of the Reference Date. Such physical inventory shall be conducted in a manner consistent with the Press Business’s past practices of inventory determination and valuation. Buyer will provide Seller with prior written notice of the date or dates on which the physical inventory will be taken and will provide Seller with a reasonable opportunity to observe each physical inventory. Not more than 75 days following the completion of such physical inventory, Buyer shall prepare and deliver to Seller: (i) an aggregated balance sheet of the Press Business as of the close of business on the Reference Date (without giving effect to the transactions contemplated hereby and excluding inter-company payables and receivables between Transferred Press Subsidiaries) (the “Closing Balance Sheet”), prepared on the basis of the Accounting Principles; (ii) a statement of its calculation of Final Mid-Month Adjustment Amount; (iii) a statement of Final Transaction Expenses as of the close of business on the Closing Date; and (iv) based on the Closing Balance Sheet, its calculation of Final Working Capital and Final Closing Indebtedness in each case, as of the close of business on the Reference Date (without giving effect to the transactions contemplated hereby) (together with Final Mid-Month Adjustment Amount, the “Closing Statement”).
2.10
Section 2.6.1 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“Attached as Schedule 2.6.1 is the statement for purposes of allocating the enterprise value of $1,080,000,000 as a basis for the calculation of the Estimated Purchase Price and the Final Purchase Price as contemplated by this Agreement (the “Purchase Price Allocation” or the “Final Allocation”).
2.11
Section 2.7 of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“2.7    Local Payments



Payments made to each Press Seller in accordance with the Purchase Price Allocation shall be paid to the relevant Press Seller using the applicable bank account details set forth on Schedule 2.7 in US dollars; provided, however, the Parties agree that payments made with respect to the acquisition of 99.99% of the quotas in Embraco Brazil shall be paid to the relevant Press Seller in local currency.
3
Article 3
3.1
Section 3.26 of the Purchase Agreement is hereby amended by adding the following paragraph to the end of such section:

“Notwithstanding anything else to the contrary in this Agreement, Seller and the Press Sellers make no representations or warranties with respect to the Riva Property.”
4
Article 5
4.1
Section 5.1.5(i) of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“Attached as Schedule 5.1.5(i) is Seller’s legal structure chart of the Transferred Press Subsidiaries to be sold by the Press Sellers to Buyer pursuant to this Agreement (the “Restructuring Plan”) as agreed by the Parties. Seller may in good faith, with the prior written consent of Buyer, such consent not to be unreasonably withheld, conditioned or delayed, periodically revise the Restructuring Plan. The separation of the Press Business from Seller and the Press Sellers, including as contemplated by the Restructuring Plan and any revisions thereto, (x) shall not materially adversely affect the operation of the Press Business after Closing and (y) shall be structured in Italy as a contribution in kind of a going concern (conferimento in natura di ramo d’azienda) to Italy Newco.”
4.2
Section 5.1.5(ii) of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“[Reserved]”
4.3
Section 5.1.5(iv) of the Purchase Agreement is hereby amended and restated in its entirety as follows:

“Attached as Schedule 5.1.5(iv) is the Micro Plan as agreed by the Parties. Seller may in good faith, with the prior written consent of Buyer (such consent not to be unreasonably withheld, conditioned or delayed) periodically revise the Micro Plan. The Micro Plan, as it may be so revised, shall be implemented and effected by Seller and its Affiliates prior to Closing.”
4.4
Section 5.1.14(i) of the Purchase Agreement is hereby amended by adding the following sentence to the end of such section:

“The Parties acknowledge that, as at the Closing, the schedules to the Transitional Services Agreement do not include any services.”



4.5
Section 5.2 of the Purchase Agreement is hereby amended by adding the following as Section 5.2.9:
“From Closing to and through the last day of the month in which the Closing occurs, to the extent (i) Buyer or its Subsidiaries do not carry on the Press Business only in the Ordinary Course of Business or take any action, that if taken by Seller or a Press Seller prior to Closing would breach the obligations set forth in Section 5.1.1, and (ii) such action has an impact on the Mid-Month Adjustment Amount, the Mid-Month Adjustment Amount shall be adjusted to remove such impact.”
4.6
Article 5 of the Purchase Agreement is hereby amended by adding the following as Section 5.3:

“5.3
China Regulatory Approvals
5.3.1
The Parties shall cooperate to finalize the application documents required for the BESCO Regulatory Approvals and the EECON Regulatory Approvals by the Closing Date. Seller, the Press Sellers, Buyer and Nidec Europe shall procure that all applications required for BESCO, EECON, the Press Sellers and Nidec Europe to obtain the BESCO Regulatory Approvals and the EECON Regulatory Approvals shall be submitted by BESCO and EECON as promptly as practicable and in any event within thirty (30) days of the Closing Date. Following submission of such applications, Seller, the Press Sellers, Buyer and Nidec Europe shall use their reasonable best efforts to obtain the BESCO Regulatory Approvals and the EECON Regulatory Approvals as promptly as practicable, and Seller, the Press Sellers, Buyer and Nidec Europe shall fully cooperate with each other in connection therewith.
5.3.2
The Parties shall procure that Buyer (or one or more of its Affiliates), on and from the Closing Date, obtains the benefits and bears the economic burdens attributable to ownership of BESCO and EECON. On and from the Closing Date, BESCO and EECON shall be operated for the sole benefit, and at the sole direction, of Buyer, and Seller and the applicable Press Sellers shall instruct the legal representative of each of BESCO and EECON to act as directed by Buyer. Without limiting the foregoing, on and from the Closing Date, Buyer shall have the right to all information of BESCO and EECON and to direct material decisions of EECON and BESCO as to: (i) selling and purchasing of goods and services; (ii) managing financial assets; (iii) selecting, acquiring and disposing of assets; (iv) researching and developing new products and processes; (v) determining a funding structure and obtaining funding; (vi) operating and capital matters, including budgets; and (vi) appointing, remunerating or terminating key management personnel.
5.3.3
In furtherance of the obligations set forth in Section 5.3.2, Seller and the Press Sellers shall not take any action that would cause any BESCO Seller Leakage on and from the Closing Date to and including the BESCO License Date or EECON Seller Leakage on and from the Closing Date to and including the EECON License Date.
4.7
Article 5 of the Purchase Agreement is hereby amended by adding the following as Section 5.4:




“5.4     Riva Property Contribution Agreement
The Parties agree that any actions taken by the Parties after the Closing Date with respect to matters governed by the Riva Property Contribution Agreement shall be governed pursuant to the terms of the Riva Property Contribution Agreement.”
5
Article 9
5.1
Section 9.1 of the Purchase Agreement is hereby amended by adding the following provisions as Section 9.1.7 and Section 9.1.8, respectively:

“9.1.7    any or both of BESCO, and Nidec Europe, as owner of BESCO, not obtaining the BESCO Regulatory Approvals applicable to such Person within three months of the date the applications required for the BESCO Regulatory Approvals are submitted solely as a result of Seller breaching its obligations under this Agreement; provided, however, that the aggregate liability of Seller to Buyer Indemnitees with respect to claims for indemnification based on this Section 9.1.7 shall not exceed $4,700,000; and

9.1.8    any or both of EECON, and Nidec Europe, as owner of EECON, not obtaining the EECON Regulatory Approvals applicable to such Person within three months of the date the applications required for the EECON Regulatory Approvals are submitted solely as a result of Seller breaching its obligations under this Agreement; provided, however, that the aggregate liability of Seller to Buyer Indemnitees with respect to claims for indemnification based on this Section 9.1.8 shall not exceed shall not exceed $21,500,000.”
6
Article 10
6.1
Section 10.1 of the Purchase Agreement is hereby amended by adding the following sections as Section 10.1.5:

“10.1.5    Chinese Share Transfer Reporting
i.
Seller shall prepare, or cause to be prepared, the Chinese Tax Filings. In connection with the preparation of the Chinese Tax Filings, the Parties agree that for purposes of determining the amount of income Tax due and payable to any Taxing Authorities of the People’s Republic of China on the China-related transactions contemplated by this Agreement (“Chinese Tax Amount”), such Chinese Tax Amount shall be calculated on the basis of the net capital gain realized for tax purposes as a result of such China-related transfers (as opposed to the gross purchase price allocable to such China-related transfers as set forth in Annex D). In connection with the preparation of the Chinese Tax Filings, Seller may discuss and confirm the taxable income, tax basis and Chinese Tax Amount payable arising from each China-related transfer with the appropriate Taxing Authorities per local practice. Seller shall promptly deliver to Buyer a draft of the Chinese Tax Filings for Buyer’s review, comment and approval (such



approval not to be unreasonably withheld, conditioned or delayed). Seller shall revise the Chinese Tax Filings to reflect mutually agreed comments received from Buyer prior to submission.
ii.
After Seller has finalized the Chinese Tax Filings in accordance with Section 10.1.5(i), Seller shall timely file, or cause to be timely filed, such report as prepared pursuant to Section 10.1.5(i) above.
iii.
Notwithstanding anything to the contrary in this Agreement but subject to Section 10.1.5(iv), the Parties agree that Seller shall be solely responsible for the reporting and payment of any Chinese Tax Amount imposed by the Chinese Taxing Authorities on the China-related transactions contemplated by this Agreement. Seller shall timely pay, or cause to be timely paid, any Chinese Tax Amount imposed by Chinese Taxing Authorities on the China-related transactions contemplated by this Agreement. As soon as practicable after payment by Seller of any Chinese Tax Amount pursuant to this Section 10.1.5(iii), Seller shall deliver to Buyer a certified copy of the receipt(s) issued by the appropriate Chinese Taxing Authorities evidencing the payment.
iv.
Only if Seller fails to comply with its obligation pursuant to Section 10.1.5(iii) to timely pay, or cause to be timely paid, the Chinese Tax Amount (if any) imposed by the Chinese Taxing Authorities on the transactions contemplated by this Agreement, Buyer shall have the right pursuant to Section 2.8 to withhold such Chinese Tax Amount that may be imposed on the China-related transactions contemplated by this Agreement. If any amount is so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller.”



7
Annex A
7.1
Part B of Annex A of the Purchase Agreement is hereby amended and restated by deleting Part B in its entirety and replacing such part with the following:
“Part B: Press Seller / Transferred Press Subsidiary / Press Shares
Press Seller
Transferred Press Subsidiary
Press Shares (% Ownership)
Whirlpool Overseas Holdings, LLC
Beijing Embraco Snowflake Compressor Company Limited
USD 2,124,000 (2.26%)
Whirlpool S.A.
Beijing Embraco Snowflake Compressor Company Limited
USD 63,006,000 (66.92%)
Qingdao EECON Electronic Controls & Appliances Co., Ltd.
USD 1,988,000 (100%)
Embraco Indústria de Compressores e Soluções em Refrigeração Ltda.
BRL 545,143,024 (99.99%)
Ealing Compañia de Gestiones y Participaciones S.A.
1,002,160 (100%)
Whirlpool do Brasil Ltda.
Embraco Indústria de Compressores e Soluções em Refrigeração Ltda.
BRL 100 (0.01%)
Embraco Slovakia s.r.o
EUR 996 (0.0033%)
Embraco Europe s.r.l.
Embraco Slovakia s.r.o
EUR 37,971,483 (99.9967%)
Embraco RUS Limited Liability Company
RUR 15 (0.01%)
Embraco Eurosales s.r.l.
EUR 5,000,000(100%)
Whirlpool International Holdings Sàrl
Embraco NA Manufacturing LLC
USD 14,049 (100%)

7.2
Part C of Annex A of the Purchase Agreement is hereby amended by deleting item 5 and sequentially numbering former items 6, 7 and 8 as 5, 6 and 7, respectively.
7.3
Part C of Annex A of the Purchase Agreement is hereby amended by deleting from item 7 “Up Points” in the parenthetical located therein.
7.4
Part E of Annex A of the Purchase Agreement is hereby amended by:
7.4.1
deleting the word “and” from the end of item 13;
7.4.2
re-numbering former item 14 as item 15; and
7.4.3
adding the following as new item 14: “all shares, quotas or equity interests held by Seller, the Press Sellers or their respective Affiliates in Up Points Serviços Empresariais S.A.; and”.
7.5
The Purchase Agreement is hereby amended by adding Annex B hereto as Annex B of the Purchase Agreement, Annex C hereto as Annex C of the Purchase Agreement, Annex D hereto as Annex D of the Purchase Agreement, Annex E hereto as Annex E of the Purchase Agreement and Annex F hereto as Annex F of the Purchase Agreement, respectively.
8
Schedules
The Schedules to the Purchase Agreement are hereby amended as follows:
8.1
Schedule 1.1H is hereby amended and restated in its entirety by replacing such Schedule with Schedule 1.1H attached hereto.
8.2
Schedule 1.4 is hereby amended and restated in its entirety by replacing such Schedule with Schedule



1.4 attached hereto.
8.3
Schedule 1.5 is hereby amended and restated in its entirety by replacing such Schedule with Schedule 1.5 attached hereto.
8.4
Schedule 1.6 attached hereto is hereby added as Schedule 1.6 to the Purchase Agreement.
8.5
Schedule 2.2.2(iv)(A) attached hereto is hereby added as Schedule 2.2.2(iv)(A) to the Purchase Agreement.
8.6
Schedule 2.2.2(iv)(B) attached hereto is hereby added as Schedule 2.2.2(iv)(B) to the Purchase Agreement.
8.7
Schedule 2.2.7 attached hereto is hereby added as Schedule 2.2.7 to the Purchase Agreement.
8.8
Schedule 2.6.1 attached hereto is hereby added as Schedule 2.6.1 to the Purchase Agreement.
8.9
Schedule 2.7 attached hereto is hereby added as Schedule 2.7 to the Purchase Agreement.
8.10
Schedule 3.2.2 is hereby amended and restated in its entirety by replacing such Schedule with Schedule 3.2.2 attached hereto.
8.11
Schedule 3.3.1 is hereby amended and restated in its entirety by replacing such Schedule with Schedule 3.3.1 attached hereto.
8.12
Schedule 3.3.3 is amended and restated in its entirety by replacing such Schedule with Schedule 3.3.3 attached hereto.
8.13
Schedule 3.6 is hereby amended by deleting paragraph 1.2 from Section 1 (Conditions to transfer of Press Shares).
8.14
Schedule 3.12.1(i) is hereby amended by deleting items 437, 438, 439 and 440 from Section 1 (Trademarks) and sequentially re-numbering all succeeding items to account for such deletion.
8.15
Schedule 3.18.3(i) is hereby amended by deleting the column titled “Up Points” in its entirety.
8.16
Schedule 5.1.5 is hereby amended and restated in its entirety by replacing such Schedule with Schedule 5.1.5(i) attached hereto.
8.17
Schedule 5.1.5(iv) attached hereto is hereby added as Schedule 5.1.5(iv) to the Purchase Agreement.
8.18
Schedule 9.9 is hereby amended and restated in its entirety by replacing such Schedule with Schedule 9.9 attached hereto.
9
No Other Amendments.
Except as specifically amended hereby, the Agreement shall continue in full force and effect as written.
10
Incorporation by Reference.
The provisions of Sections 11.2, 11.3, 11.6, 11.7, 11.8, 11.9, 11.10, 11.11, 11.12, 11.13, 11,14, 11.15 and 11.16 of the Purchase Agreement are hereby incorporated into this Amendment as if fully set forth herein.

[Signature page follows]









In witness whereof, the Parties have duly executed this Amendment as of the date first above written.

NIDEC CORPORATION

By:    /s/ Takamitsu Araki    
Name: Takamitsu Araki
Title: Attorney-In-Fact




In witness whereof, the Parties have duly executed this Amendment as of the date first above written.

WHIRLPOOL CORPORATION

By:    /s/ Marc Bitzer    
Name: Marc Bitzer
Title: Chairman and Chief Executive Officer




In witness whereof, the Parties have duly executed this Amendment as of the date first above written.

WHIRLPOOL S.A.

By:    /s/ João Carlos Costa Brega    
Name: João Carlos Costa Brega
Title: Director


WHIRLPOOL S.A.

By:    /s/ Bernardo Ribeiro dos Santos Galina    
Name: Bernardo Ribeiro dos Santos Galina
Title: Director





In witness whereof, the Parties have duly executed this Amendment as of the date first above written.

Whirlpool do Brasil Ltda.

By:    /s/ João Carlos Costa Brega    
Name: João Carlos Costa Brega
Title: Administrador


Whirlpool do Brasil Ltda.

By:    /s/ Bernardo Ribeiro dos Santos Galina    
Name: Bernardo Ribeiro dos Santos Galina
Title: Administrador






In witness whereof, the Parties have duly executed this Amendment as of the date first above written.

EMBRACO EUROPE S.R.L.

By:    /s/ Luigi La Morgia    
Name: Luigi La Morgia
Title: Sole Director






In witness whereof, the Parties have duly executed this Amendment as of the date first above written.

WHIRLPOOL INTERNATIONAL HOLDINGS Sàrl

By:    /s/ Dimitri Storme    
Name: Dimitri Storme
Title: Class A Manager

WHIRLPOOL INTERNATIONAL HOLDINGS Sàrl

By:    /s/ Tony Whiteman    
Name: Tony Whiteman
Title: Class B Manager




In witness whereof, the Parties have duly executed this Amendment as of the date first above written.

WHIRLPOOL OVERSEAS HOLDINGS, LLC

By:    /s/ Matthew M. Nochowitz    
Name: Matthew M. Nochowitz
Title: President




Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marc R. Bitzer, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Whirlpool Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
July 23, 2019
 
 
/s/ MARC R. BITZER
Name:
Marc R. Bitzer
Title:
Chairman of the Board, President and Chief Executive Officer






Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James W. Peters, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Whirlpool Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
July 23, 2019
 
 
/s/ JAMES W. PETERS
Name:
James W. Peters
Title:
Executive Vice President and Chief Financial Officer





Exhibit 32.1

Certifications Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Whirlpool Corporation ("Whirlpool") for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Marc R. Bitzer, as Chief Executive Officer of Whirlpool, and James W. Peters, as Chief Financial Officer of Whirlpool, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Whirlpool.


/s/ MARC R. BITZER
Name:
Marc R. Bitzer
Title:
Chairman of the Board, President and Chief Executive Officer
Date:
July 23, 2019
 
 
/s/ JAMES W. PETERS
Name:
James W. Peters
Title:
Executive Vice President and Chief Financial Officer
Date:
July 23, 2019