WHIRLPOOL CORP /DE/ - Quarter Report: 2019 September (Form 10-Q)

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 September 30, 2019



☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-3932

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 October 18, 2019
Common stock, par value $1 per share		63,199,776

WHIRLPOOL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

Three and Nine Months Ended September 30, 2019

TABLE OF CONTENTS



		PAGE
PART I
Item 1.	Financial Statements
	Consolidated Condensed Statements of Comprehensive Income (Loss)	5
	Consolidated Condensed Balance Sheets	6
	Consolidated Condensed Statements of Cash Flows	7
	Notes to the Consolidated Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51

PART II
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53

SIGNATURES		54

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.

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.

PART I. FINANCIAL INFORMATION



ITEM 1.	FINANCIAL STATEMENTS

TABLE OF CONTENTS



	PAGE
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Condensed Statements of Comprehensive Income (Loss)	5
Consolidated Condensed Balance Sheets	6
Consolidated Condensed Statements of Cash Flows	7



		PAGE
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1.	Basis of Presentation	8
2.	Revenue Recognition	10
3.	Leases	10
4.	Cash, Cash Equivalents and Restricted Cash	11
5.	Inventories	12
6.	Property, Plant and Equipment	12
7.	Financing Arrangements	12
8.	Commitments and Contingencies	14
9.	Pension and Other Postretirement Benefit Plans	18
10.	Hedges and Derivative Financial Instruments	19
11.	Fair Value Measurements	23
12.	Stockholders' Equity	26
13.	Restructuring Charges	29
14.	Income Taxes	31
15.	Segment Information	32
16.	Divestitures and Held for Sale	34
17.	Goodwill and Other Intangibles	35

WHIRLPOOL CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

FOR THE PERIODS ENDED SEPTEMBER 30

(Millions of dollars, except per share data)



	Three Months Ended					Nine Months Ended
	2019			2018		2019			2018
Net sales	$	5,091		$	5,326	$	15,037		$	15,377
Expenses
Cost of products sold	4,350			4,431		12,552			12,790
Gross margin	741			895		2,485			2,587
Selling, general and administrative	491			550		1,580			1,596
Intangible amortization	17			18		53			58
Restructuring costs	56			28		142			216
Impairment of goodwill and other intangibles	—			—		—			747
(Gain) loss on sale and disposal of businesses	(516		)	—		(437		)	—
Operating profit (loss)	693			299		1,147			(30		)
Other (income) expense
Interest and sundry (income) expense	(29		)	24		(222		)	106
Interest expense	45			52		148			141
Earnings (loss) before income taxes	677			223		1,221			(277		)
Income tax expense	313			7		311			52
Net earnings (loss)	364			216		910			(329		)
Less: Net earnings available to noncontrolling interests	6			6		14			24
Net earnings (loss) available to Whirlpool	$	358		$	210	$	896		$	(353	)
Per share of common stock
Basic net earnings (loss) available to Whirlpool	$	5.62		$	3.25	$	14.04		$	(5.18	)
Diluted net earnings (loss) available to Whirlpool	$	5.57		$	3.22	$	13.93		$	(5.18	)
Dividends declared	$	1.20		$	1.15	$	3.55		$	3.40
Weighted-average shares outstanding (in millions)
Basic	63.6			64.5		63.8			68.2
Diluted	64.2			65.3		64.3			68.2

Comprehensive income (loss)	$	419		$	130	$	1,002		$	(573	)

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

WHIRLPOOL CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(Millions of dollars, except share data)



	(Unaudited)
	September 30, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	993		$	1,498
Accounts receivable, net of allowance of $127 and $136, respectively	2,588			2,210
Inventories	2,883			2,533
Prepaid and other current assets	911			839
Assets held for sale	—			818
Total current assets	7,375			7,898
Property, net of accumulated depreciation of $6,331 and $6,190, respectively	3,203			3,414
Right of use assets	746			—
Goodwill	2,420			2,451
Other intangibles, net of accumulated amortization of $572 and $527, respectively	2,217			2,296
Deferred income taxes	2,031			1,989
Other noncurrent assets	414			299
Total assets	$	18,406		$	18,347
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	4,229		$	4,487
Accrued expenses	626			690
Accrued advertising and promotions	755			827
Employee compensation	430			393
Notes payable	941			1,034
Current maturities of long-term debt	546			947
Other current liabilities	973			811
Liabilities held for sale	—			489
Total current liabilities	8,500			9,678
Noncurrent liabilities
Long-term debt	4,105			4,046
Pension benefits	530			637
Postretirement benefits	310			318
Lease liabilities	617			—
Other noncurrent liabilities	395			463
Total noncurrent liabilities	5,957			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	2,786			2,768
Retained earnings	7,659			6,933
Accumulated other comprehensive loss	(2,603		)	(2,695		)
Treasury stock, 49 million and 48 million shares, respectively	(4,926		)	(4,827		)
Total Whirlpool stockholders' equity	3,028			2,291
Noncontrolling interests	921			914
Total stockholders' equity	3,949			3,205
Total liabilities and stockholders' equity	$	18,406		$	18,347

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

WHIRLPOOL CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE PERIODS ENDED SEPTEMBER 30

(Millions of dollars)



	Nine Months Ended
	2019			2018
Operating activities
Net earnings (loss)	$	910		$	(329	)
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	443			491
Impairment of goodwill and other intangibles	—			747
(Gain) loss on sale and disposal of businesses	(437		)	—
Changes in assets and liabilities:
Accounts receivable	(517		)	(585		)
Inventories	(525		)	(271		)
Accounts payable	(110		)	(122		)
Accrued advertising and promotions	(62		)	(95		)
Accrued expenses and current liabilities	29			196
Taxes deferred and payable, net	(59		)	(105		)
Accrued pension and postretirement benefits	(72		)	(433		)
Employee compensation	77			35
Other	(243		)	(144		)
Cash used in operating activities	(566		)	(615		)
Investing activities
Capital expenditures	(306		)	(330		)
Proceeds from sale of assets and business	1,034			27
Proceeds from held-to-maturity securities	—			60
Investment in related businesses	—			(25		)
Other	(5		)	(4		)
Cash provided by (used in) investing activities	723			(272		)
Financing activities
Net proceeds from borrowings of long-term debt	699			703
Repayments of long-term debt	(946		)	(381		)
Net proceeds (repayments) from short-term borrowings	(63		)	1,761
Dividends paid	(229		)	(232		)
Repurchase of common stock	(100		)	(1,102		)
Common stock issued	5			7
Other	(7		)	(6		)
Cash provided by (used in) financing activities	(641		)	750
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(55		)	(74		)
Decrease in cash, cash equivalents and restricted cash	(539		)	(211		)
Cash, cash equivalents and restricted cash at beginning of period	1,538			1,293
Cash, cash equivalents and restricted cash at end of period	$	999		$	1,082

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

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.

Out-of-Period Adjustments

During the third quarter of 2019, we recorded a net adjustment of $34 million related to prior years resulting from the one time transition tax deemed repatriation on earnings of certain foreign subsidiaries that were previously tax deferred and related impacts. This adjustment resulted in a decrease of net earnings available to Whirlpool of $34 million and a decrease of $0.53 in diluted earnings per share for the three and nine months ended 2019. The Company determined the impact was not material to the prior years' financial statements and is not expected to be material to the Consolidated Statement of Comprehensive Income (Loss) for the year ending December 31, 2019.

In addition, during the third quarter of 2019 we recorded an adjustment of $22 million related to the first quarter of 2019 resulting from other foreign subsidiary income items and corresponding tax credit impacts. This adjustment resulted in a decrease of $22 million in net earnings available to Whirlpool and a decrease of $0.34 in diluted earnings per share for the three months ended September 30, 2019. The Consolidated Condensed Statement of Comprehensive Income (Loss) for the nine months ended September 30, 2019 is not impacted by this adjustment.

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.

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

We adopted the following standard, none of which have a material impact on our Consolidated Condensed Financial Statements:



Standard		Effective Date
2019-07	Codification Updates to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Final Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10441, Investment Company Reporting Modernization, and Miscellaneous Updates	July 1, 2019

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 ASC 606 was initially adopted. 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 or material to the Company.

(2) REVENUE RECOGNITION

Disaggregation of Revenue

The following table presents our disaggregated revenues by revenue source. We sell products within all product categories in each operating segment. For additional information on the disaggregated revenues by geographic regions, see Note 15 to the Consolidated Condensed Financial Statements.

Revenues related to our former compressor business were fully reflected in our Latin America segment through June 30, 2019. We completed the sale of our compressor business on July 1, 2019. For additional information on the sale of Embraco, see Note 16 to the Consolidated Condensed Financial Statements.



	Three Months Ended September 30,				Nine Months Ended September 30,
Millions of dollars	2019		2018		2019		2018
Major product categories:
Laundry	$	1,576	$	1,580	$	4,531	$	4,605
Refrigeration	1,673		1,577		4,694		4,474
Cooking	1,183		1,204		3,289		3,342
Dishwashing	414		421		1,169		1,229
Total major product category net sales	$	4,846	$	4,782	$	13,683	$	13,650
Compressors	—		266		557		847
Spare parts and warranties	227		246		749		768
Other	18		32		48		112
Total net sales	$	5,091	$	5,326	$	15,037	$	15,377

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

Bad Debt Expense

Bad debt expense was not material for the three and nine months ended September 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 had operating lease costs of approximately $150 million for the nine months ended September 30, 2019.

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

At September 30, 2019, we have no leases classified as financing leases and we have approximately $885 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	$	45
2020	166
2021	139
2022	119
2023	107
After 2023	309
Total lease payments	$	885
Less: interest	123
Present value of lease liabilities	$	762

The long-term portion of the lease liabilities included in the amounts above is $617 million. The remainder of our lease liabilities are included in other current liabilities in the Consolidated Condensed Balance Sheets.

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

During the nine months ended September 30, 2019 the cash paid for amounts included in the measurement of the liabilities and the operating cash flows was $147 million. The right of use assets obtained in exchange for new liabilities was $39 million in the nine 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.

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:



	September 30,
Millions of dollars	2019		2018
Cash and cash equivalents as presented in our Consolidated Condensed Balance Sheets	$	993	$	1,032
Restricted cash included in prepaid and other current assets ⁽¹⁾	6		45
Restricted cash included in other noncurrent assets ⁽¹⁾	—		5
Cash, cash equivalents and restricted cash as presented in our Consolidated Condensed Statements of Cash Flows	$	999	$	1,082

⁽¹⁾Change in restricted cash reflects realization of foreign currency translation adjustments of $1 million and $3 million, respectively, for the nine months ended September 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 September 30, 2019 and December 31, 2018:



Millions of dollars	September 30, 2019			December 31, 2018
Finished products	$	2,414		$	2,076
Raw materials and work in process	627			617
	3,041			2,693
Less: excess of FIFO cost over LIFO cost	(158		)	(160		)
Total inventories	$	2,883		$	2,533

LIFO inventories represented 44% and 41% of total inventories at September 30, 2019 and December 31, 2018, respectively.

(6) PROPERTY, PLANT & EQUIPMENT

The following table summarizes our property, plant and equipment at September 30, 2019 and December 31, 2018:



Millions of dollars	September 30, 2019			December 31, 2018
Land	$	98		$	102
Buildings	1,585			1,593
Machinery and equipment	7,851			7,909
Accumulated depreciation	(6,331		)	(6,190		)
Property, plant and equipment, net	$	3,203		$	3,414

During the nine months ended September 30, 2019, we disposed of buildings, machinery and equipment no longer in use with a net book value of $57 million, primarily related to the Naples asset impairment charges.

For additional information, see Note 13 to the Consolidated Condensed Financial Statements.

(7) FINANCING ARRANGEMENTS

Debt Offering

On February 26, 2019, Whirlpool Corporation completed a bond offering consisting of $700 million in principal amount of 4.75% Senior Notes due in 2029. The notes contain covenants that limit Whirlpool Corporation's ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The notes are registered 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 August 9, 2019, we repaid $1.0 billion pursuant to our April 23, 2018 Term Loan Agreement with Citibank, N.A., as Administrative Agent, and certain other financial institutions, representing full repayment of amounts borrowed under the term loan. As previously disclosed, we agreed to repay this term loan amount with the net cash proceeds received from the sale of our Embraco business unit to Nidec Corporation, which closed on July 1, 2019.

On 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.

Credit Facilities

On August 6, 2019, Whirlpool Corporation entered into a Fourth 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. The Amended Long-Term Facility provides aggregate borrowing capacity of $3.5 billion, an increase of $500 million from the Company's prior amended and restated credit agreement. The Amended Long-Term Facility has a maturity date of August 6, 2024, unless earlier terminated, and amends and restates in its entirety our previously existing Third Amended and Restated Long-Term Credit Agreement, dated May 17, 2016, as amended.

The interest and fee rates payable with respect to the Amended Long-Term Facility based on our current debt rating are as follows: (1) the spread over EURIBOR is 1.125%; (2) the spread over prime is 0.125%; and (3) the ticking fee is 0.100%. The Amended Long-Term Facility contains customary covenants and warranties including, among other things, a debt to capitalization ratio of less than or equal to 0.65 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 at the subsidiary level.

In addition to the committed $3.5 billion Amended Long-Term Facility, we have committed credit facilities in Brazil. The committed credit facilities in Brazil provide borrowings up to 1.0 billion Brazilian reais (approximately $240 million at September 30, 2019 and $258 million at December 31, 2018), maturing through 2022. On August 5, 2019 we terminated a €250 million European revolving credit facility that we entered into in July 2015. The termination of this facility did not have a material impact on our Consolidated Condensed Financial Statements.

We had no borrowings outstanding under the committed credit facilities at September 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. As previously disclosed, during the third quarter of 2019 we repaid the $1 billion term loan.

The following table summarizes the carrying value of notes payable at September 30, 2019 and December 31, 2018:



Millions of dollars	September 30, 2019		December 31, 2018
Commercial paper	$	711	$	—
Short-term borrowings due to banks	230		1,034
Total notes payable	$	941	$	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 $203 million and $161 million as of September 30, 2019 and December 31, 2018, respectively.

(8) COMMITMENTS AND CONTINGENCIES

Embraco Antitrust Matters

Beginning in February 2009, the Embraco 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 was subsequently affirmed by the Brazilian Supreme Court, but remains subject to further proceedings. Based on this ruling, we were entitled to recognize $72 million in additional credits, which were recognized in prior periods. As of September 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 September 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 $465 million as of September 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 such credits have been recognized since 2004. In 2009, we entered into a Brazilian government program ("IPI Amnesty") which provided extended payment terms and reduced penalties and interest to encourage tax payers to resolve this and certain other disputed tax credit amounts. As permitted by the program, we elected to settle certain debts through the use of other existing tax credits and recorded charges of approximately $34 million in 2009 associated with these matters. In July 2012, the Brazilian revenue authority notified us that a portion of our proposed settlement was rejected and we received tax assessments of 253 million Brazilian reais (approximately $61 million as of September 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 September 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 114 million Brazilian reais (approximately $27 million as of September 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 September 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 in taxes, which have been paid, and $15 million in fees that we anticipate will be fully 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 in taxes, which have been paid, and $1 million in fees 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 (Loss). The Brazilian tax authorities have sought clarification before the Brazilian Supreme Court (in a leading case involving another taxpayer) of certain matters, including the amount of these credits (i.e., the gross rate or net credit amount), and certain other matters that could affect the rights of Brazilian taxpayers regarding these credits, and a hearing is scheduled for December 2019. 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.

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	329			218
Settlements made during the period/other	(208		)	(216		)
Balance at September 30	$	389		$	279

Current portion	$	262		$	204
Non-current portion	127			75
Total	$	389		$	279

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

As part of this process, we investigated incident reports associated with a particular component in certain Indesit-designed horizontal axis washers produced in EMEA. Whirlpool is discussing the issue with the appropriate regulatory authorities, and is assessing corrective action. In the third quarter of 2019, we accrued approximately $105 million in estimated product warranty expense related to this matter. This estimate is based on several assumptions which are inherently unpredictable and which we may need to materially revise in the future.

For the three and nine months ended September 2019, we incurred approximately $14 million and $26 million, respectively, 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 September 30, 2019 and December 31, 2018, the guaranteed amounts totaled $116 million and $146 million, respectively. The fair value of these guarantees were nominal at September 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 $2.7 billion and $3.5 billion at September 30, 2019 and December 31, 2018, respectively. Our total short-term outstanding bank indebtedness under guarantees was $19 million at September 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 September 30,
	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2019			2018			2019			2018			2019			2018
Service cost	$	1		$	1		$	1		$	1		$	2		$	2
Interest cost	30			30			5			5			4			3
Expected return on plan assets	(44		)	(43		)	(6		)	(8		)	—			—
Amortization:
Actuarial loss	11			14			2			2			—			—
Prior service credit	(1		)	(1		)	—			—			(2		)	(3		)
Settlement and curtailment (gain) loss	10			—			—			1			—			4
Net periodic cost	$	7		$	1		$	2		$	1		$	4		$	6




	Nine Months Ended September 30,
	United States Pension Benefits						Foreign Pension Benefits						Other Postretirement Benefits
Millions of dollars	2019			2018			2019			2018			2019			2018
Service cost	$	2		$	2		$	4		$	4		$	5		$	5
Interest cost	92			89			17			17			12			10
Expected return on plan assets	(133		)	(128		)	(21		)	(25		)	—			—
Amortization:
Actuarial loss	35			40			6			7			—			—
Prior service credit	(2		)	(2		)	—			—			(7		)	(2		)
Settlement and curtailment (gain) loss	10			—			1			(2		)	(7		)	4
Net periodic cost	$	4		$	1		$	7		$	1		$	3		$	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 September 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	$	1	$	1	$	2	$	2
Interest and sundry (income) expense	6		—		1		—		2		4
Net periodic benefit cost	$	7	$	1	$	2	$	1	$	4	$	6




	Nine Months Ended September 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		$	4	$	4		$	5		$	5
Interest and sundry (income) expense	2		(1		)	3		(3		)	(2		)	12
Net periodic benefit cost	$	4	$	1		$	7	$	1		$	3		$	17

On September 15, 2018, we contributed $358 million in cash contributions to the pension trust for our U.S. defined benefit pension plans, which included $350 million of discretionary contributions. There have been no contributions to the pension trust for our U.S. defined benefit plan during the nine months ended September 30, 2019.

(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.

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 September 30, 2019 there was a notional amount of $1,275 million of outstanding interest rate swap agreements. At December 31, 2018 there were no outstanding interest rate swap agreements. The increase in the notional amount of cross-currency interest rate swaps during the nine months ended September 30, 2019 was designed to mitigate the risk from newly created intercompany debt agreements.

We may enter into swap rate lock agreements to effectively reduce our exposure to interest rate risk by locking in interest rates on probable long-term debt issuances.

Net Investment Hedging

The following table summarizes our foreign currency denominated debt and foreign exchange forwards/options designated as net investment hedges at September 30, 2019 and December 31, 2018:



	Notional (Local)				Notional (USD)				Current Maturity
Instrument	2019		2018		2019		2018		Current Maturity
Senior note - 0.625%	€	500	€	500	$	545	$	573	March 2020
Foreign exchange forwards/options	MXN 7,200		MXN 7,200		$	365	$	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 (Loss). As of September 30, 2019 and December 31, 2018, there was no ineffectiveness on hedges designated as net investment hedges.

The following table summarizes our outstanding derivative contracts and their effects in our Consolidated Condensed Balance Sheets at September 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	$	3,093	$	3,126	$	113	$	49	$	43	$	48	(CF/NI)	35	44
Commodity swaps/options	181		216		4		1		18		27		(CF)	21	30
Interest rate derivatives	1,275		—		27		—		3		—		(CF)	113	0
Total derivatives accounted for as hedges					$	144	$	50	$	64	$	75
Derivatives not accounted for as hedges
Foreign exchange forwards/options	$	2,952	$	4,382	$	46	$	27	$	22	$	69	N/A	13	21
Commodity swaps/options	3		3		—		—		—		—		N/A	10	0
Total derivatives not accounted for as hedges					46		27		22		69
Total derivatives					$	190	$	77	$	86	$	144

Current					$	97	$	60	$	48	$	95
Noncurrent					93		17		38		49
Total derivatives					$	190	$	77	$	86	$	144

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

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 (Loss) for the periods presented:



		Three Months Ended September 30,
		Gain (Loss) Recognized in OCI (Effective Portion ) ⁽²⁾
Cash Flow Hedges - Millions of dollars		2019			2018
Foreign exchange forwards/options		$	79		$	11
Commodity swaps/options		(5		)	(19		)
Interest rate derivatives		54			(2		)

Net Investment Hedges
Foreign currency		55			(14		)
		$	183		$	(24	)

		Three Months Ended September 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	)	$	(1	)
Foreign exchange forwards/options	Cost of products sold	5			1
Foreign exchange forwards/options	Interest and sundry (income) expense	49			33
Commodity swaps/options ⁽³⁾	Cost of products sold	(7		)	1
Interest rate derivatives	Interest expense	3			—
Interest rate derivatives	Interest and sundry (income) expense	47			—
		$	96		$	34

		Three Months Ended September 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	$	53		$	(1	)

⁽²⁾ The tax impact of the cash flow hedges was $(8) million and $11 million for the three months ended September 30, 2019 and 2018, respectively. The tax impact of the net investment hedges was $(15) million and $4 million for the three months ended September 30, 2019 and 2018, respectively.

⁽³⁾ Cost for commodity swaps/options are recognized in cost of sales as products are sold.



		Nine Months Ended September 30,
		Gain (Loss) Recognized in OCI (Effective Portion)⁽⁴⁾
Cash Flow Hedges - Millions of dollars		2019			2018
Foreign exchange		$	103		$	87
Commodity swaps/options		(5		)	(34		)
Interest rate derivatives		32			(2		)

Net Investment Hedges
Foreign currency		36			(8		)
		$	166		$	43

		Nine Months Ended September 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	$	(3	)	$	(3	)
Foreign exchange forwards/options	Cost of products sold	16			(11		)
Foreign exchange forwards/options	Interest and sundry (income) expense	82			89
Commodity swaps/options ⁽³⁾	Cost of products sold	(16		)	24
Interest rate derivatives	Interest expense	7			(1		)
Interest rate derivatives	Interest and sundry (income) expense	47			—
		$	133		$	98

		Nine Months Ended September 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	$	47		$	(6	)

⁽⁴⁾ The tax impact of the cash flow hedges was $2 million and $11 million for the nine months ended September 30, 2019 and 2018, respectively. The tax impact of the net investment hedges was $(9) million and $3 million for the nine months ended September 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 September 30, 2019 and 2018. There were no hedges designated as fair value for the periods ended September 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 a gain of $22 million at September 30, 2019.

(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.

The following table summarizes the valuation of our assets and liabilities measured at fair value on a recurring basis at September 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
Short-term investments⁽¹⁾	$	620	$	578	$	1	$	5	$	619	$	573		$	620	$	578
Net derivative contracts	—		—		—		—		104		(67		)	104		(67		)
Available for sale investments	—		7		—		12		—		—			—		12

⁽¹⁾Short-term investments are primarily comprised of money market funds and highly liquid, low risk investments less than 90 days.

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.

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

South Africa Business Disposal

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

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

Naples Manufacturing Plant Restructuring Action

During the third quarter of 2019, we entered into a preliminary purchase agreement with a third-party purchaser for the reconversion of our Naples, Italy manufacturing plant. We recorded an impairment charge of $25 million for the write-down of certain assets to their fair value of $0. Fair value was based on a feasibility study considering future use internally and marketability externally (Level 2 input). These assets were fully impaired because they were determined to have no alternative use or salvage value and insufficient cash flows to support recoverability of the carrying amount.

See Note 13 to the Consolidated Condensed Financial Statements for additional information.

Other Fair Value Measurements

The fair value of long-term debt (including current maturities) was $4.97 billion and $4.17 billion at September 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
Comprehensive income
Net earnings	364			358			—			—			—		6
Other comprehensive income	55			—			54			—			—		1
Comprehensive income	419			358			54			—			—		7
Stock issued (repurchased)	(54		)	—			—			(54		)	—		—
Dividends declared	(83		)	(79		)	—			—			—		(4		)
Balances, September 30, 2019	$	3,949		$	7,659		$	(2,603	)	$	(2,140	)	$	112	$	921

⁽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.



				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
Comprehensive income
Net earnings	216			210			—			—			—		6
Other comprehensive income	(86		)	—			(84		)	—			—		(2		)
Comprehensive income	130			210			(84		)	—			—		4
Stock issued (repurchased)	(90		)	—			—			(90		)	—		—
Dividends declared	(76		)	(74		)	—			—			—		(2		)
Balances, September 30, 2018	$	3,308		$	6,837		$	(2,590	)	$	(1,999	)	$	112	$	948

⁽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].

Other Comprehensive Income (Loss)

The following table summarizes our other comprehensive income (loss) and related tax effects for the periods presented:



	Three Months Ended September 30,
	2019							2018
Millions of dollars	Pre-tax		Tax Effect			Net		Pre-tax			Tax Effect			Net
Currency translation adjustments⁽³⁾	$	35	$	(15	)	$	20	$	(82	)	$	4		$	(78	)
Cash flow hedges	32		(8		)	24		(44		)	11			(33		)
Pension and other postretirement benefits plans	17		(6		)	11		32			(7		)	25
Other comprehensive income (loss)	84		(29		)	55		(94		)	8			(86		)
Less: Other comprehensive income (loss) available to noncontrolling interests	1		—			1		(2		)	—			(2		)
Other comprehensive income (loss) available to Whirlpool	$	83	$	(29	)	$	54	$	(92	)	$	8		$	(84	)




	Nine Months Ended September 30,
	2019									2018
Millions of dollars	Pre-tax			Tax Effect			Net			Pre-tax			Tax Effect			Net
Currency translation adjustments⁽³⁾	$	73		$	(9	)	$	64		$	(271	)	$	3		$	(268	)
Cash flow hedges	(3		)	2			(1		)	(47		)	11			(36		)
Pension and other postretirement benefits plans	39			(10		)	29			82			(22		)	60
Other comprehensive income (loss)	109			(17		)	92			(236		)	(8		)	(244		)
Less: Other comprehensive income (loss) available to noncontrolling interests	—			—			—			(2		)	—			(2		)
Other comprehensive income (loss) available to Whirlpool	$	109		$	(17	)	$	92		$	(234	)	$	(8	)	$	(242	)

^`(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 nine months ended September 30, 2019:



	Three Months Ended	Nine Months Ended
Millions of dollars	(Gain) Loss Reclassified	(Gain) Loss Reclassified	Classification in Earnings
Pension and postretirement benefits, pre-tax	21	43	Interest and sundry (income) expense

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 September 30,				Nine Months Ended September 30,
Millions of dollars and shares	2019		2018		2019		2018
Numerator for basic and diluted earnings per share - Net earnings (loss) available to Whirlpool	$	358	$	210	$	896	$	(353	)
Denominator for basic earnings per share - weighted-average shares	63.6		64.5		63.8		68.2
Effect of dilutive securities - share-based compensation	0.6		0.8		0.5		—
Denominator for diluted earnings per share - adjusted weighted-average shares	64.2		65.3		64.3		68.2
Anti-dilutive stock options/awards excluded from earnings per share	1.3		1.7		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 nine months ended September 30, 2019, we repurchased 718,421 shares under this share repurchase program at an aggregate price of approximately $100 million. At September 30, 2019, there were approximately $700 million in remaining funds authorized under this program.

Share repurchases are made from time to time on the open market as conditions warrant. The program does not obligate us to repurchase any of our shares and it has 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 complete as of September 30, 2019.

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 substantially complete in 2019. As of September 30, 2019, approximately $21 million remains to be expensed.

On May 31, 2019, we announced our intention to reconvert our Naples, Italy manufacturing plant and potentially sell the plant to a third party. On September 16, 2019, we entered into a preliminary agreement to sell the plant to a third-party purchaser and to support costs associated with the transition. Finalization of the transaction is subject to satisfaction of certain conditions precedent, including consultation with the government and unions.

In connection with this action, we incurred approximately $25 million in asset impairment costs and approximately $4 million in other associated costs during the nine months ended September 30, 2019. We anticipate that we will incur approximately $19 million in employee-related costs and approximately $79 million in other associated costs in connection with this action. We estimate that $98 million of the estimated $127 million total costs will result in future cash expenditures. We estimate that approximately $122 million of the $127 million total costs will be incurred in 2019 and that approximately $73 million of the estimated $98 million total cash expenditures will occur in 2019. We expect these actions to be completed in 2020.

The following table summarizes the restructuring actions above for the nine months ended September 30, 2019 and the total costs to date for each plan:



Millions of dollars	2019		Total
Indesit	$	9	$	237
EMEA fixed cost actions	$	45	$	59
Naples	$	29	$	29

The following table summarizes the changes to our restructuring liability during the nine months ended September 30, 2019:



Millions of dollars	December 31, 2018			Charges to Earnings		Cash Paid			Non-Cash and Other			September 30, 2019
Employee termination costs	$	84		$	66	$	(101	)	$	—		$	49
Asset impairment costs	—			56		(7		)	(41		)	8
Facility exit costs	(9		)	15		(19		)	—			(13		)
Other exit costs	21			5		(4		)	(3		)	19
Total	$	96		$	142	$	(131	)	$	(44	)	$	63

The following table summarizes the restructuring charges by operating segment for the period presented:



	Nine Months Ended
Millions of dollars	September 30, 2019
North America	$	—
EMEA	132
Latin America	7
Asia	3
Corporate / Other	—
Total	$	142

(14) INCOME TAXES

Income tax expense was $313 million and $311 million for the three and nine months ended September 30, 2019, respectively, compared to income tax expense of $7 million and $52 million in the same periods of 2018. For the three months ended September 30, 2019, the increase in effective tax rate from the prior period is due primarily to the impact of the sale of Embraco, prior period adjustments and impact of changes in enacted tax rates. For the nine months ended September 30, 2019, the increase in effective tax rate from the prior period is due to tax expense on the sale of Embraco, prior period adjustments , non-deductible impairments and government payments, partially offset by valuation allowance releases. Total tax expense related to the sale of Embraco was $150 million and $161 million for the three and nine months ended September 30, 2019, respectively, of which approximately $107 million was calculated based on the US statutory tax rate.

For additional information on prior period adjustments, see Note 1 to the Consolidated Condensed Financial Statements.

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 September 30,					Nine Months Ended September 30,
Millions of dollars	2019		2018			2019			2018
Earnings (loss) before income taxes	$	677	$	223		$	1,221		$	(277	)

Income tax expense computed at United States statutory tax rate	142		47			256			(58		)
Valuation allowances	1		4			(195		)	43
U.S. transition tax and prior period adjustments	56		78			56			78
Audits and settlements	7		—			(6		)	—
U.S. foreign income items, net of credits	8		(108		)	19			(146		)
Changes in enacted tax rates	41		(54		)	66			(54		)
Non deductible impairments	—		—			—			138
Non deductible government payments	—		—			—			37
Sale of Embraco	43		—			54			—
Other	15		40			61			14
Income tax expense computed at effective worldwide tax rates	$	313	$	7		$	311		$	52

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 injected additional internal capital into certain EMEA entities to meet local country capitalization requirements and we repaid all outstanding borrowings under the Whirlpool EMEA Finance Term Loan, in advance of the recently completed 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 the exit of our Turkey domestic sales operations and sale of our South Africa business and tax planning strategies that were deemed to no longer be prudent.

(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 through June 30, 2019, which were included in Other/Eliminations.

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



	Three Months Ended September 30,
	OPERATING SEGMENTS
Millions of dollars	North America		EMEA			Latin America		Asia		Other/ Eliminations			Total Whirlpool
Net sales
2019	$	3,010	$	1,090		$	632	$	358	$	1		$	5,091
2018	2,994		1,134			878		339		(19		)	5,326
Intersegment sales
2019	70		20			331		87		(508		)	—
2018	66		19			371		100		(556		)	—
Depreciation and amortization
2019	$	45	$	46		$	17	$	17	$	16		$	141
2018	46		44			29		17		16			152
EBIT
2019	387		(4		)	29		9		301			722
2018	360		(39		)	61		13		(120		)	275
Total assets
September 30, 2019	$	8,004	$	9,345		$	4,062	$	2,524	$	(5,529	)	$	18,406
December 31, 2018	7,161		7,299			4,745		2,636		(3,494		)	18,347
Capital expenditures
2019	35		24			23		17		10			109
2018	46		36			24		16		14			136




	Nine Months Ended September 30,
	OPERATING SEGMENTS
Millions of dollars	North America		EMEA			Latin America		Asia		Other/ Eliminations			Total Whirlpool
Net sales
2019	$	8,403	$	3,126		$	2,395	$	1,159	$	(46	)	$	15,037
2018	8,292		3,298			2,628		1,215		(56		)	15,377
Intersegment sales
2019	181		63			1,010		258		(1,512		)	—
2018	203		83			998		259		(1,543		)	—
Depreciation and amortization
2019	$	149	$	147		$	48	$	51	$	48		$	443
2018	142		158			93		51		47			491
EBIT
2019	1,052		(41		)	130		31		197			1,369
2018	979		(91		)	151		75		(1,250		)	(136		)
Total assets
September 30, 2019	$	8,004	$	9,345		$	4,062	$	2,524	$	(5,529	)	$	18,406
December 31, 2018	7,161		7,299			4,745		2,636		(3,494		)	18,347
Capital expenditures
2019	113		51			68		46		28			306
2018	110		76			55		43		46			330

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



	Three Months Ended September 30,						Nine Months Ended September 30,
in millions	2019			2018			2019			2018
Items not allocated to segments:
Restructuring costs	$	(56	)	$	(28	)	$	(142	)	$	(216	)
Brazil indirect tax credit	—			—			180			—
Product warranty and liability expense	(119		)	—			(131		)	—
(Gain) loss on sale and disposal of businesses	516			—			437			—
French antitrust settlement	—			—			—			(114		)
Impairment of goodwill and intangibles	—			—			—			(747		)
Trade customer insolvency	—			(29		)	—			(29		)
Corporate expenses and other	(40		)	(63		)	(147		)	(144		)
Total other/eliminations	$	301		$	(120	)	$	197		$	(1,250	)

A reconciliation of our segment information for total EBIT to the corresponding amounts in the Consolidated Condensed Statements of Comprehensive Income (Loss) is shown in the table below for the periods presented:



	Three Months Ended September 30,					Nine Months Ended September 30,
in millions	2019			2018		2019			2018
Operating profit	$	693		$	299	$	1,147		$	(30	)
Interest and sundry (income) expense	(29		)	24		(222		)	106
Total EBIT	$	722		$	275	$	1,369		$	(136	)
Interest expense	45			52		148			141
Income tax expense	313			7		311			52
Net earnings (loss)	$	364		$	216	$	910		$	(329	)
Less: Net earnings available to noncontrolling interests	6			6		14			24
Net earnings (loss) available to Whirlpool	$	358		$	210	$	896		$	(353	)

(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 completed the sale of Embraco and received cash proceeds of $1.1 billion inclusive of anticipated cash on hand at the time of closing. With the proceeds from this transaction, we repaid the outstanding term loan amount of approximately $1 billion as required under the April 23, 2018 Term Loan Agreement with Citibank, N.A., as Administrative Agent.

In connection with the sale, we recorded a pre-tax gain, net of transaction and other costs, of $511 million ($350 million net of taxes) during the three and nine months ended September 30, 2019. The gain calculation is subject to change based on finalization of the amounts for working capital and other customary post-closing adjustments.

Embraco was reported within our Latin America reportable segment and met the criteria for held for sale accounting through the closing date. The operations of Embraco did not meet the criteria to be presented as discontinued operations. The assets and liabilities of Embraco were de-consolidated as of the closing date and there are no remaining carrying amounts in the Consolidated Condensed Balance Sheets as of September 30, 2019.

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



Millions of dollars	September 30, 2019		December 31, 2018
Accounts receivable, net of allowance of $0 and $8, respectively	—		198
Inventories	—		165
Prepaid and other current assets	—		42
Property, net of accumulated depreciation of $0 and $616, respectively	—		364
Right of use assets	—		—
Other noncurrent assets	—		49
Total assets	$	—	$	818

Accounts payable	$	—	$	361
Accrued expenses	—		27
Accrued advertising and promotion	—		12
Other current liabilities	—		55
Lease liabilities	—		—
Other noncurrent liabilities	—		34
Total liabilities	$	—	$	489

The following table summarizes Embraco's earnings before income taxes for the periods presented:



	Three Months Ended September 30,				Nine Months Ended September 30,
Millions of dollars	2019		2018		2019		2018
Earnings before income taxes	$	—	$	21	$	47	$	37

South Africa Business Disposal

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

On September 5, 2019, we completed the sale of our South Africa operations. In connection with the sale, we finalized the loss on disposal of $63 million which is recorded in the nine months ended September 30, 2019. The loss includes a charge of $29 million for the write-down of the assets of the disposal group to fair value and $34 million of cumulative foreign currency translation adjustments included in the carrying amount of the disposal group to calculate the impairment.

The South Africa business was reported within our EMEA reportable segment and met the criteria for held for sale accounting through the closing date. The operations of South Africa did not meet the criteria to be presented as discontinued operations.

For additional information see Note 11 to the Consolidated Condensed Financial Statements.

Divestiture of Turkey Domestic Sales Operations

For the nine months ended September 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.

(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.

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 third-quarter GAAP net earnings available to Whirlpool of $358 million (net earnings margin of 7.0%), or $5.57 per share, compared to GAAP net earnings available to Whirlpool of $210 million (net earnings margin of 3.9%), or $3.22 per share, in the same prior-year period. On a GAAP basis, net earnings margin was favorably impacted by a gain on the sale of the Embraco compressor business of approximately $511 million and previously-announced global cost-based pricing benefits, partially offset by product warranty and liability expense of $119 million.

Whirlpool delivered a strong global performance with ongoing (non-GAAP) EBIT margin of 7.2%, driven by strong price/mix results in North American and significant margin improvement in EMEA resulting from execution of strategic actions to restore profitability. These results were partially offset by trade inventory timing and soft industry demand in certain markets.

In addition, we completed the sale of our Embraco business unit and paid down our outstanding term loan, making significant progress towards our long-term Gross Debt to EBITDA goal of 2.0.

Our third-quarter results demonstrate continued progress towards delivering our long term goals and our full-year financial commitments of margin expansion and improved free cash conversion.

RESULTS OF OPERATIONS

The following table summarizes the consolidated results of operations for the periods presented:



	Three Months Ended September 30,						Nine Months Ended September 30,
Consolidated - Millions of dollars, except per share data	2019			2018		Better/(Worse)	2019			2018			Better/(Worse)
Units (in thousands)	17,093			17,658		(3.2)%	48,334			49,071			(1.5)%
Net sales	$	5,091		$	5,326	(4.4)	$	15,037		$	15,377		(2.2)
Gross margin	741			895		(17.2)	2,485			2,587			(3.9)
Selling, general and administrative	491			550		11.0	1,580			1,596			1.0
Restructuring costs	56			28		nm	142			216			34.3
Impairment of goodwill and other intangibles	—			—		—	—			747			nm
(Gain) loss on sale and disposal of businesses	(516		)	—		nm	(437		)	—			nm
Interest and sundry (income) expense	(29		)	24		nm	(222		)	106			nm
Interest expense	45			52		14.6	148			141			(4.7)
Income tax expense	313			7		nm	311			52			nm
Net earnings (loss) available to Whirlpool	358			210		70.5%	896			(353		)	nm
Diluted net earnings available to Whirlpool per share	$	5.57		$	3.22	73.2%	$	13.93		$	(5.18	)	nm

nm = not meaningful

Consolidated net sales decreased 4.4% and 2.2% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The decrease for the three months ended was primarily driven by the unfavorable impacts of unit volume declines, foreign currency and the divestiture of the Embraco compressor business. The decrease for the nine months ended was primarily driven by the unfavorable impacts of unit volume declines, foreign currency and the divestiture of the Embraco compressor business, partially offset by the favorable impact of product price/mix. Excluding the impact of foreign currency, consolidated net sales decreased 3.5% and increased 0.2% for the three and nine months ended September 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 for the three months and nine months ended September 30, 2019 decreased to 14.5% and 16.5% from 16.8% and 16.8% for the same periods in 2018, respectively, which reflects the unfavorable impacts from unit volume declines, raw material inflation, foreign currency and estimated product warranty expense related to washers produced in EMEA, partially offset by the favorable impact of product price/mix.

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.

North America

Following are the results for the North America region:

2019 compared to 2018

Units sold decreased 6.9% and 5.1% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

Net sales increased 0.5% and 1.3% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The increase for the three and nine months ended September 30, 2019 was primarily driven by the favorable impact from product price/mix, partially offset by lower unit volumes. Excluding the impact from foreign currency, net sales increased 0.6% and 1.6% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

EBIT margin was 12.8% and 12.5% for the three and nine months ended September 30, 2019, respectively, compared to 12.0% and 11.8% for the same periods in 2018. EBIT increased for the three and nine months ended September 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.

EMEA

Following are the results for the EMEA region:

2019 compared to 2018

Units sold decreased 0.6% and increased 1.9% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

Net sales decreased 3.8% and 5.2% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The decrease for the three months ended September 30, 2019 was primarily driven by unfavorable impacts from foreign currency and unit volume decline, partially offset by product price/mix. The decrease for the nine months ended September 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 0.5% and increased 0.1% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

EBIT margin was (0.4)% and (1.3)% for the three and nine months ended September 30, 2019, respectively, compared to (3.4)% and (2.7)% for the same periods in 2018. EBIT increased for the three months ended September 30, 2019 compared to the same periods in 2018 primarily due to the favorable impacts of restructuring benefits. EBIT increased for the nine months ended September 30, 2019 primarily due to the favorable impacts of unit volume growth and restructuring benefits.

Latin America

Following are the results for the Latin America region:

2019 compared to 2018

Units sold decreased 8.2% and 0.7% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

Net sales decreased 27.9% and 8.9% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The decrease for the three and nine months ended September 30, 2019 was primarily driven by the divestiture of the Embraco compressor business and the unfavorable impact of foreign currency. Excluding the impact from foreign currency, net sales decreased 27.4% and 3.8% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

EBIT margin was 4.6% and 5.4% for the three and nine months ended September 30, 2019, respectively, compared to 7.0% and 5.7% for the same periods in 2018. The decrease in EBIT for the three and nine months ended September 30, 2019 was primarily due to the unfavorable impact of foreign currency and the divestiture of the Embraco compressor business, partially offset by the favorable impact of product price/mix in the home appliance business. Prior period results for the nine months ended were negatively impacted by a Brazil truck drivers' strike.

Asia

Following are the results for the Asia region:

2019 compared to 2018

Units sold increased 11.6% and 0.6% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

Net sales increased 5.7% and decreased 4.6% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The increase for the three months ended September 30, 2019 was primarily driven by the favorable impacts of unit volume growth in India, partially offset by the unfavorable impact of product price/mix and foreign currency. The decrease for the nine months ended September 30, 2019 was primarily driven by unfavorable impacts from foreign currency and product price/mix, partially offset by unit volume growth in India. Excluding the impact from foreign currency, net sales increased 7.1% and decreased 0.6% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018.

2019 compared to 2018

EBIT margin was 2.4% and 2.7% for the three and nine months ended September 30, 2019, respectively, compared to 3.8% and 6.2% for the same periods in 2018. The unfavorable impacts of product price/mix and brand investments in China were partially offset by the favorable impacts of unit volume growth and cost productivity in India. Prior period results for the nine months ended were positively impacted by Chinese government incentives.

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 September 30,				Nine Months Ended September 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	$214	7.1%	$211	7.1%	$617	7.3%	$578	7.0%
EMEA	119	10.9%	140	12.4%	369	11.8%	422	12.8%
Latin America	61	9.7%	95	10.8%	229	9.6%	265	10.1%
Asia	57	15.9%	54	16.0%	193	16.6%	181	14.9%
Corporate/other	40	—	50	—	172	—	150	—
Consolidated	$491	9.6%	$550	10.3%	$1,580	10.5%	$1,596	10.4%

Consolidated selling, general and administrative expenses for the three months ended September 30, 2019 decreased compared to the same period in 2018 due to ongoing restructuring activities and the divestiture of the Embraco compressor business. Consolidated selling, general and administrative expenses for the nine months ended September 30, 2019 is comparable.

Restructuring

We incurred restructuring charges of $56 million and $142 million for the three and nine months ended September 30, 2019, respectively, compared to $28 million and $216 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 nine months ended September 30, 2018 related to the EMEA reporting unit.

For additional information, see Note 11 and Note 17 to the Consolidated Condensed Financial Statements.

(Gain) Loss on Sale and Disposal of Businesses

We recorded a pre-tax gain of $511 million on the sale of the Embraco compressor business for the three and nine months ended September 30, 2019.

We incurred a loss of $74 million for the nine months ended September 30, 2019 related to charges on the sale of the South Africa business ($63 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 nine months ended September 30, 2019 increased compared to the same periods in 2018. The increase in interest and sundry (income) expense for the three months ended September 30, 2019 was primarily due to foreign currency and the results of a legal settlement. The increase in interest and sundry (income) expense for the nine months ended September 30, 2019 was primarily due to Brazil indirect tax credits recorded of $180 million which reflects $196 million of indirect tax credits, net of related fees. The comparable period in the prior year includes charges related to the preliminary FCA settlement of $111 million.

For additional information, see Note 8 and Note 10 to the Consolidated Condensed Financial Statements.

Interest Expense

Interest expense for the three and nine months ended September 30, 2019 was comparable to the same periods in 2018.

Income Taxes

Income tax expense was $313 million and $311 million for the three and nine months ended September 30, 2019 compared to income tax expense of $7 million and $52 million in the same periods of 2018. For the three months ended September 30, 2019, the increase in effective tax rate from the prior period is due primarily to the impact of the sale of Embraco, prior period adjustments and impact of changes in enacted tax rates. For the nine months ended September 30, 2019, the increase in effective tax rate from the prior period is due to tax expense on the sale of Embraco, prior period adjustments , non-deductible impairments and government payments, partially offset by valuation allowance releases. Total tax expense related to the sale of Embraco was $150 million and $161 million for the three and nine months ended September 30, 2019, respectively, of which approximately $107 million was calculated based on the US statutory tax rate.

For additional information, see Note 1 and 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 $546 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 September 30, 2019, we have $941 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 September 30, 2019, we had cash or cash equivalents greater than 1% of our consolidated assets in China and India, which represented 2.2% and 1.0%, respectively. In addition, we did not have any third-party accounts receivable greater than 1% of our consolidated assets in any single country outside of the United States. We continue to monitor general financial instability and uncertainty globally.

The Company had cash and cash equivalents of approximately $1.0 billion at September 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 expected future foreign investments. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable United States taxes (if any) and withholding taxes payable to various countries. It is not 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 September 30, 2019, we had 276 million Brazilian reais (approximately $66 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 September 30, 2019, we have 134 million Brazilian reais (approximately $32 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").

On June 26, 2019, Whirlpool and Nidec received the European Commission's final approval of the Transaction, and the parties closed the Transaction on July 1, 2019. At closing, pursuant to the purchase agreement and a subsequent agreement memorializing the purchase price adjustment, the Company received $1.1 billion inclusive of anticipated cash on hand at the time of closing, with final purchase price amounts subject to working capital and other customary post-closing adjustments. Whirlpool has agreed to retain certain liabilities relating to tax, environmental, labor and products following closing of the Transaction.

On August 9, 2019, the Company repaid $1.0 billion pursuant to the Company's April 23, 2018 Term Loan Agreement by and among the Company, Citibank, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A. as Syndication Agent, and certain other financial institutions, representing full repayment of amounts borrowed under the term loan. As previously disclosed, the Company agreed to repay this outstanding term loan amount with the net cash proceeds received from the sale of Embraco.

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:



	Nine Months Ended September 30,
Millions of dollars	2019			2018
Cash provided by (used in):
Operating activities	$	(566	)	$	(615	)
Investing activities	723			(272		)
Financing activities	(641		)	750
Effect of exchange rate changes	(55		)	(74		)
Net change in cash, cash equivalents and restricted cash	$	(539	)	$	(211	)

Cash Flows from Operating Activities

Cash used in operating activities during the nine months ended September 30, 2019 decreased compared to the same period in 2018, which primarily reflects the impact of the FCA settlement and payment, $350 million of discretionary pension funding in the prior year and the impact of changes in working capital, including seasonal production timing, inventory reduction efforts in the fourth quarter of 2018, shifts in trade customer mix, improved credit management activities and the divestiture of the Embraco compressor business.

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 provided by investing activities during the nine months ended September 30, 2019 increased compared to the same period in 2018, which primarily reflects cash proceeds related to the sale of Embraco.

Cash Flows from Financing Activities

Cash used in financing activities during the nine months ended September 30, 2019 increased compared to the same period in 2018, which primarily reflects higher repayments of long-term debt (increase of $565 million), lower proceeds from borrowings of short-term debt (decrease of approximately $1.8 billion) and lower stock repurchases under our share repurchase program primarily due to the 2018 modified Dutch auction tender offer (decrease of approximately $1.0 billion).

Dividends paid in financing activities during the nine months ended September 30, 2019 was comparable to the same period in 2018.

Financing Arrangements

The Company had total committed credit facilities of approximately $3.8 billion at September 30, 2019. The facilities are geographically diverse and reflect the Company's 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 September 30, 2019 or December 31, 2018.

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 September 30, 2019, we had approximately $342 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. Ongoing EBIT margin is calculated by dividing ongoing EBIT by net sales. Sales excluding foreign currency is calculated by translating the current period net sales, in functional currency, to U.S. dollars using the prior-year period's exchange rate compared to the prior-year period net sales. Management believes that sales excluding foreign currency provides stockholders with a clearer basis to assess our results over time, excluding the impact of exchange rate fluctuations. We also disclose segment EBIT, which we define as operating profit less interest and sundry (income) expense and excluding restructuring costs, asset impairment charges and certain other items that management believes are not indicative of the region's ongoing performance, if any, as the financial metric used by the Company's Chief Operating Decision Maker to evaluate performance and allocate resources in accordance with ASC 280, Segment Reporting.

We believe that these non-GAAP measures provide meaningful information to assist investors and stockholders in understanding our financial results and assessing our prospects for future performance, and reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial measures, provide a more complete understanding of our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for reported net sales, net earnings available to Whirlpool, net earnings as a percentage of net sales and cash provided by (used in) operating activities, the most directly comparable GAAP financial measures. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Please refer to a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures below.



Ongoing Earnings Before Interest & Taxes (EBIT) Reconciliation: in millions	Three Months Ended					Nine Months Ended
	2019			2018		2019			2018
Net earnings (loss) available to Whirlpool ⁽¹⁾	$	358		$	210	$	896		$	(353	)
Net earnings available to noncontrolling interests	6			6		14			24
Income tax expense	313			7		311			52
Interest expense	45			52		148			141
Earnings (loss) before interest & taxes	$	722		$	275	$	1,369		$	(136	)
Restructuring expense	56			28		142			216
Trade customer insolvency	—			29		—			29
Divestiture related transition costs	(17		)	—		—			—
Brazil indirect tax credit	—			—		(180		)	—
(Gain) loss on sale and disposal of businesses	(516		)	—		(437		)	—
Product warranty and liability expense	119			—		131			—
French antitrust settlement	—			—		—			114
Impairment of goodwill and other intangibles	—			—		—			747
Ongoing EBIT	$	364		$	332	$	1,025		$	970

⁽¹⁾ Net earnings margin is approximately 7.0% and 3.9% for the three months ended September 30, 2019 and September 30, 2018, respectively, and is calculated by dividing net earnings (loss) available to Whirlpool by consolidated net sales for the three months ended September 30, 2019 and September 30, 2018 of $5,091 and $5,326, respectively.



Free Cash Flow (FCF) Reconciliation: in millions	Nine Months Ended
Free Cash Flow (FCF) Reconciliation: in millions	2019			2018
Cash used in operating activities ⁽²⁾	$	(566	)	$	(615	)
Capital expenditures	(306		)	(330		)
Proceeds from sale of assets and business ⁽³⁾	1,034			27
Change in restricted cash ⁽⁴⁾	33			44
Repayment of term loan	(1,000		)	—
Free cash flow	$	(805	)	$	(874	)

Cash provided by (used in) investing activities	$	723		$	(272	)
Cash provided by (used in) financing activities	$	(641	)	$	750

⁽²⁾Cash used in operating activities for the nine months ended September 30, 2019 includes $136 million of cash taxes paid for the sale of the Embraco compressor business.

⁽³⁾Proceeds from sale of assets and business for the nine months ended September 30, 2019 includes $1,011 million of net cash proceeds received to date for the sale of the Embraco compressor business.

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

FORWARD-LOOKING PERSPECTIVE

Earnings per diluted share presented below are net of tax, while each adjustment is presented on a pre-tax basis. Our anticipated full-year GAAP tax rate of approximately 25% includes the impact of the gain on sale of Embraco.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	$16.80	—	$17.55
Including:
Restructuring expense	$(3.11)
Brazil indirect tax credit	2.79
(Gain) loss on sale and disposal of businesses	6.79
Product warranty and liability expense	(2.03)
Income tax impact	(0.77)
Normalized tax adjustment	(1.62)

Industry demand
North America	(2)%	—	—%
EMEA	(1)%	—	1%
Latin America	3%	—	4%
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 includes the net proceeds and the term loan repayment related to the sale of the Embraco business of approximately $1 billion. 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	375
Repayment of term loan	(1,000)
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.

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 nine months ended September 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 interim review was completed by the International Trade Commission during 2019. The President maintains discretion to modify the remedy.

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 September 30, 2019. We expect these and other tariffs to impact material and freight costs in future quarters, which could require us to modify our current business practices and could have a material adverse effect on our financial statements in any particular reporting period.

Brexit

In 2016, the UK held a referendum, the outcome of which was an expressed public desire to exit the European Union (“Brexit”), which has resulted in greater uncertainty related to the free movement of goods, services, people and capital between the UK and the EU. Many potential future impacts of Brexit remain unclear and could adversely impact certain areas of our business, including, but not limited to, an increase in duties and delays in the delivery of products, and adverse impacts to our suppliers and financing institutions. In order to mitigate the risks associated with Brexit, we are preparing for potential adverse impacts by collaborating across Company functions and working with external partners to develop the necessary contingency plans.



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 September 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 September 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.

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

The following table summarizes repurchases of Whirlpool's common stock in the three months ended September 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
July 1, 2019 through July 31, 2019	18,200	$	148.29	18,200	$	747
August 1, 2019 through August 31, 2019	237,000	$	137.05	237,000	$	715
September 1, 2019 through September 30, 2019	102,895	$	143.96	102,895	$	700
Total	358,095	$	139.61	358,095

Share repurchases are made from time to time on the open market as conditions warrant. The program does not obligate us to repurchase any of our shares and it has no expiration date.



ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.



ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.



ITEM 5.	OTHER INFORMATION

None.



ITEM 6.	EXHIBITS



Exhibit 10.1	Aircraft Time Sharing Agreement dated as of July 29, 2019 by and between Whirlpool Corporation and Marc Bitzer

Exhibit 10.2	Fourth Amended and Restated Long Term Credit Agreement dated as of August 6, 2019 among Whirlpool Corporation, Whirlpool Europe B.V., Whirlpool Canada Holding Co., Whirlpool Global B.V., Whirlpool UK Appliances Limited, the other borrowers party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, and BNP Paribas, Mizuho Bank, Ltd. and Wells Fargo Bank, National Association, as Documentation Agents

Exhibit 31.1	Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2	Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

Exhibit 101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL: (i) Consolidated Condensed Statements of Comprehensive Income (Loss), (ii) Consolidated Condensed Balance Sheets; (iii) Consolidated Condensed Statements of Cash Flows, and (iv) Notes to Consolidated Condensed Financial Statements, tagged as blocks of text and including detailed tags

Exhibit 104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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:		October 23, 2019