UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3932
(Exact name of registrant as specified in its charter)
|(State of Incorporation)||(I.R.S. Employer Identification No.)|
|2000 North M-63|
|(Address of principal executive offices)||(Zip Code)|
Registrant's telephone number, including area code (269) 923-5000
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading symbol(s)||Name of each exchange on which registered|
|Common stock, par value $1.00 per share||WHR||Chicago Stock Exchange||and||New York Stock Exchange|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|Large accelerated filer||☒||Accelerated filer||☐|
|Non-accelerated filer||☐||Smaller reporting company||☐|
|Emerging growth company||☐|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
|Class of common stock|| ||Shares outstanding at October 14, 2022|
|Common stock, par value $1.00 per share|| ||54,478,354|
QUARTERLY REPORT ON FORM 10-Q
Three and nine months ended September 30, 2022
TABLE OF CONTENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Certain statements contained in this quarterly report, including those within the forward-looking perspective section within the Management's Discussion and Analysis section, 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," "guarantee," "seek," and the negative of these words and words and terms of similar substance. 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 future financial results, long-term value creation goals, restructuring expectations, productivity, raw material prices and the impact of COVID-19 and the Russia/Ukraine conflict on our operations. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool's forward-looking statements. Among these factors are: (1) the ongoing Russian invasion of Ukraine and related conflict and sanctions; (2) COVID-19 pandemic-related business disruptions and economic uncertainty; (3) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers, and the impact of the changing retail environment, including direct-to-consumer sales; (4) 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; (5) Whirlpool's ability to maintain its reputation and brand image; (6) the ability of Whirlpool to achieve its business objectives and leverage its global operating platform, and accelerate the rate of innovation; (7) Whirlpool’s ability to understand consumer preferences and successfully develop new products; (8) Whirlpool's ability to obtain and protect intellectual property rights; (9) acquisition, divestiture, and investment-related risks, including risks associated with our past acquisitions; (10) Whirlpool's ability to navigate risks associated with our presence in emerging markets; (11) risks related to our international operations, including changes in foreign regulations; (12) Whirlpool's ability to respond to unanticipated social, political and/or economic events; (13) information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; (14) product liability and product recall costs; (15) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (16) our ability to attract, develop and retain executives and other qualified employees; (17) the impact of labor relations; (18) fluctuations in the cost of key materials (including steel, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (19) Whirlpool's ability to manage foreign currency fluctuations; (20) impacts from goodwill impairment and related charges; (21) triggering events or circumstances impacting the carrying value of our long-lived assets; (22) inventory and other asset risk; (23) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and postretirement benefit plans; (24) 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; (25) the effects and costs of governmental investigations or related actions by third parties; (26) changes in the legal and regulatory environment including environmental, health and safety regulations, and taxes and tariffs; (27) Whirlpool's ability to respond to the impact of climate change and climate change regulation; and (28) the uncertain global economy and changes in economic conditions which affect demand for our products.
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 the "Risk Factors" section of our Annual Report on Form 10-K, as updated in Part II, Item 1A of our Quarterly Reports on Form 10-Q.
Unless otherwise indicated, the terms "Whirlpool," "the Company," "we," "us," and "our" refer to Whirlpool Corporation and its consolidated subsidiaries.
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
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|
|Net sales||$||4,784 ||$||5,488 ||$||14,801 ||$||16,170 |
|Cost of products sold||4,104 ||4,380 ||12,373 ||12,823 |
|Gross margin||680 ||1,108 ||2,428 ||3,347 |
|Selling, general and administrative||446 ||524 ||1,283 ||1,526 |
|Intangible amortization||8 ||10 ||24 ||37 |
|Restructuring costs||3 ||7 ||13 ||35 |
|Impairment of goodwill and other intangibles||— ||— ||384 ||— |
|(Gain) loss on sale and disposal of businesses||2 ||15 ||348 ||(105)|
|Operating profit||221 ||552 ||376 ||1,854 |
|Other (income) expense|
|Interest and sundry (income) expense||(19)||(78)||(45)||(139)|
|Interest expense||40 ||44 ||126 ||134 |
|Earnings (loss) before income taxes||200 ||586 ||295 ||1,859 |
|Income tax expense (benefit)||53 ||100 ||196 ||353 |
|Equity method investment income (loss), net of tax||(2)||— ||(6)||— |
|Net earnings (loss)||145 ||486 ||93 ||1,506 |
|Less: Net earnings (loss) available to noncontrolling interests||2 ||15 ||8 ||21 |
|Net earnings (loss) available to Whirlpool||$||143 ||$||471 ||$||85 ||$||1,485 |
|Per share of common stock|
|Basic net earnings (loss) available to Whirlpool||$||2.61 ||$||7.56 ||$||1.52 ||$||23.67 |
|Diluted net earnings (loss) available to Whirlpool||$||2.60 ||$||7.51 ||$||1.51 ||$||23.47 |
|Dividends declared||$||1.75 ||$||1.40 ||$||5.25 ||$||4.05 |
|Weighted-average shares outstanding (in millions)|
|Comprehensive income (loss)||$||296 ||$||532 ||$||511 ||$||1,905 |
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Millions of dollars, except share data)
|September 30, 2022||December 31, 2021|
|Cash and cash equivalents||$||1,794 ||$||3,044 |
Accounts receivable, net of allowance of $83 and $98, respectively
|2,410 ||3,100 |
|Inventories||2,884 ||2,717 |
|Prepaid and other current assets||831 ||834 |
|Total current assets||7,919 ||9,695 |
Property, net of accumulated depreciation of $6,397 and $6,619, respectively
|2,569 ||2,805 |
|Right of use assets||833 ||946 |
|Goodwill||2,177 ||2,485 |
Other intangibles, net of accumulated amortization of $520 and $522, respectively
|1,800 ||1,981 |
|Deferred income taxes||1,741 ||1,920 |
|Other noncurrent assets||472 ||453 |
|Total assets||$||17,511 ||$||20,285 |
|Liabilities and stockholders' equity|
|Accounts payable||$||4,445 ||$||5,413 |
|Accrued expenses||580 ||609 |
|Accrued advertising and promotions||692 ||854 |
|Employee compensation||240 ||576 |
|Notes payable||8 ||10 |
|Current maturities of long-term debt||248 ||298 |
|Other current liabilities||596 ||750 |
|Total current liabilities||6,809 ||8,510 |
|Long-term debt||4,722 ||4,929 |
|Pension benefits||273 ||378 |
|Postretirement benefits||132 ||142 |
|Lease liabilities||699 ||794 |
|Other noncurrent liabilities||525 ||519 |
|Total noncurrent liabilities||6,351 ||6,762 |
Common stock, $1 par value, 250 million shares authorized, 114 million and 114 million shares issued, respectively, and 54 million and 59 million shares outstanding, respectively
|114 ||114 |
|Additional paid-in capital||3,053 ||3,025 |
|Retained earnings||9,960 ||10,170 |
|Accumulated other comprehensive loss||(1,939)||(2,357)|
Treasury stock, 60 million and 55 million shares, respectively
|Total Whirlpool stockholders' equity||4,178 ||4,846 |
|Noncontrolling interests||173 ||167 |
|Total stockholders' equity||4,351 ||5,013 |
|Total liabilities and stockholders' equity||$||17,511 ||$||20,285 |
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE PERIODS ENDED SEPTEMBER 30
(Millions of dollars)
|Nine Months Ended|
|Net earnings (loss)||$||93 ||$||1,506 |
|Adjustments to reconcile net earnings to cash provided by (used in) operating activities:|
|Depreciation and amortization||344 ||378 |
|Impairment of goodwill and other intangibles||384 ||— |
|(Gain) loss on sale and disposal of businesses||348 ||(105)|
|(Gain) loss on previously held equity interest||— ||(42)|
|Changes in assets and liabilities:|
|Accounts receivable||510 ||(289)|
|Accounts payable||(745)||617 |
|Accrued advertising and promotions||(114)||20 |
|Accrued expenses and current liabilities||22 ||207 |
|Taxes deferred and payable, net||(10)||50 |
|Accrued pension and postretirement benefits||(81)||(89)|
|Employee compensation||(297)||10 |
|Cash provided by (used in) operating activities||310 ||1,294 |
|Proceeds from sale of assets and businesses||76 ||299 |
|Acquisition of businesses, net of cash acquired||— ||(46)|
|Cash held by divested businesses||(75)||(393)|
|Cash provided by (used in) investing activities||(333)||(446)|
|Net proceeds from borrowings of long-term debt||300 ||300 |
|Net proceeds (repayments) of long-term debt||(300)||(300)|
|Net proceeds (repayments) from short-term borrowings||— ||1 |
|Repurchase of common stock||(903)||(641)|
|Common stock issued||3 ||76 |
|Cash provided by (used in) financing activities||(1,195)||(856)|
|Effect of exchange rate changes on cash, cash equivalents and restricted cash||(32)||(51)|
|Increase (decrease) in cash, cash equivalents and restricted cash||(1,250)||(59)|
|Cash, cash equivalents and restricted cash at beginning of year||3,044 ||2,934 |
|Cash, cash equivalents and restricted cash at end of period||$||1,794 ||$||2,875 |
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
The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by U.S. GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2021.
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.
Risks and Uncertainties
During the first quarter of 2022, Russia commenced a military invasion of Ukraine, and the ensuing conflict has created disruption in the EMEA region and around the world. While we continued experiencing some of this disruption during the quarter, the duration and severity of the effects on our business and the global economy are inherently unpredictable. We continue to closely monitor the ongoing conflict which could materially impact our financial results in the future. We have some sales and distribution operations in Ukraine, however, the revenues and net assets are not material to our EMEA operating segment and consolidated results.
On June 27, 2022, our subsidiary Whirlpool EMEA SpA entered into a share purchase agreement with Arçelik A.Ş. (“Arcelik”) to sell our Russian business to Arcelik for contingent consideration. The sale of the Russian business was completed on August 31, 2022. For additional information, see Note 15 to the Consolidated Condensed Financial Statements.
Furthermore, COVID-19 and subsequent macroeconomic volatility continue to impact countries across the world, and the duration and severity of the effects are currently unknown. The pandemic has impacted the Company and could materially impact our financial results in the future.
The Consolidated Condensed Financial Statements presented herein reflect estimates and assumptions made by management at September 30, 2022. These estimates and assumptions affect, among other things, the Company’s goodwill, long-lived asset and indefinite-lived intangible asset valuation; inventory valuation; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; and the allowance for expected credit losses and bad debt. Events and changes in circumstances arising after October 21, 2022, including those resulting from the impacts of COVID-19 as well as the ongoing conflict in Ukraine, will be reflected in management’s estimates for future periods.
Goodwill and indefinite-lived intangible assets
We continue to monitor the significant global economic uncertainty to assess the outlook for demand for our products and the impact on our business and our overall financial performance. Our Indesit, Hotpoint* and Maytag trademarks continue to be at risk at September 30, 2022.
The potential impact of demand disruptions, production impacts or supply constraints along with a number of other factors could negatively effect revenues for the Indesit, Hotpoint* and Maytag trademarks, but we remain committed to the strategic actions necessary to realize the long-term forecasted revenues and profitability of these trademarks. A lack of recovery or further deterioration in market conditions, a sustained trend of weaker than expected financial performance for our Indesit, Hotpoint* or Maytag trademarks, among other factors, as a result of the COVID-19 pandemic, other macroeconomic factors or other unforeseen events could result in an impairment charge in future periods which could have a material adverse effect on our financial statements.
As a result of our analysis, and in consideration of the totality of events and circumstances, there were no triggering events of impairment identified during the third quarter of 2022. The goodwill in our reporting units or other indefinite-lived intangible assets are not presently at risk for future impairment.
During the second quarter of 2022, triggering events of impairment were identified for EMEA goodwill and Indesit and Hotpoint* trademarks and impairment charges were recorded. For additional information, see Note 10 and 16 to the Consolidated Condensed Financial Statements.
Under U.S. GAAP, the Company calculates its quarterly tax provision based on an estimated effective tax rate for the year and then adjusts this amount by certain discrete items each quarter. Potential changing and volatile macro-economic conditions could cause fluctuations in forecasted earnings before income taxes. As such, the Company's effective tax rate could be subject to volatility as forecasted earnings before income taxes are impacted by events which cannot be predicted. In addition, potential future economic deterioration brought on by the pandemic, ongoing conflict in Ukraine, and related sanctions or other factors, such as potential sales of businesses and changes in tax rates may negatively impact the realizability and/or valuation of certain deferred tax assets.
Other Accounting Matters
Synthetic lease arrangements
We have a number of synthetic lease arrangements with financial institutions for non-core properties. The leases contain provisions for options to purchase, extend the original term for additional periods or return the property. As of September 30, 2022 and December 31, 2021, these arrangements include residual value guarantees of up to approximately $356 million and $264 million, respectively, that could potentially come due in future periods. We do not believe it is probable that any material amounts will be owed under these guarantees. Therefore, no material amounts related to the residual value guarantees are included in the lease payments used to measure the right-of-use assets and lease liabilities.
The majority of these leases are classified as operating leases. We have assessed the reasonable certainty of these provisions to determine the appropriate lease term. The leases were measured using our incremental borrowing rate and are included in our right of use assets and lease liabilities in the Consolidated Condensed Balance Sheets. Rental payments are calculated at the applicable reference rate plus a margin. The impact to the Consolidated Condensed Balance Sheets and Consolidated Condensed Statements of Comprehensive Income (Loss) is nominal.
*. Whirlpool ownership of the Hotpoint brand in the EMEA and Asia Pacific regions is not affiliated with the Hotpoint brand sold in the Americas.
In the first quarter of 2022, the Company sold and leased back a group of non-core properties for net proceeds of approximately $52 million. The initial total annual rent for the properties is approximately $2 million per year over an initial 15 year lease term and is subject to annual rent increases. Under the terms of the lease agreement, the Company is responsible for all taxes, insurance and utilities and is required to adequately maintain the properties for the lease term. The Company has two sequential 5-year renewal options.
The transaction met the requirements for sale-leaseback accounting. Accordingly, the Company recorded the sale of the properties, which resulted in a gain of approximately $44 million ($36 million, net of tax) recorded in selling, general and administrative expense in the Consolidated Condensed Statements of Comprehensive Income (Loss). The related land and buildings were removed from property, plant and equipment, net and the appropriate right-of-use asset and lease liabilities of approximately $32 million were recorded in the Consolidated Condensed Balance Sheets.
Supply Chain Financing Arrangements
The Company has ongoing agreements globally with various third-parties to allow certain suppliers the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions.
We have no economic interest in the sale of these receivables and no direct financial relationship with the financial institutions concerning these services. Our obligations to suppliers, including amounts due and scheduled payment terms, are not impacted. All outstanding balances under these programs are recorded in accounts payable on our Consolidated Condensed Balance Sheets. Approximately $1.0 billion have been issued to participating financial institutions as of September 30, 2022 and $1.4 billion as of December 31, 2021, respectively.
A downgrade in our credit rating or changes in the financial markets could limit the financial institutions’ willingness to commit funds to, and participate in, the programs. We do not believe such risk would have a material impact on our working capital or cash flows.
Equity Method Investments
Whirlpool holds an equity interest of 20% in Whirlpool (China) Co., Ltd. (Whirlpool China), an entity which was previously controlled by the Company. The following tables summarize balances and transactions with Whirlpool China and its subsidiaries during the periods presented.
|Millions of dollars||September 30, 2022||December 31, 2021|
|Other noncurrent assets||Carrying value of equity interest||$||201 ||$||206 |
|Accounts payable||Outstanding amounts due||$||112 ||$||137 |
|Millions of dollars||Three Months Ended September 30,||Nine Months Ended September 30,|
|Purchases from Whirlpool China||$||95 ||$||86 ||$||316 ||$||152 |
The licensing revenue and outstanding accounts receivable from Whirlpool China and its subsidiaries are not material for the periods presented.
Related Party Transactions
After September 2021, the Company has a controlling equity ownership of 87% in Elica PB India which is consolidated in Whirlpool Corporation's financial statements and is reported within our Asia reportable segment. Goodwill of $100 million, which is not deductible for tax purposes, arose from this transaction and is allocated to the Asia reportable segment.
Elica PB India is a VIE for which the Company is the primary beneficiary. The carrying amount of customer relationships, which are included in Other intangible assets, net of accumulated amortization, amounts to $32 million as of September 30, 2022 and $36 million as of December 31, 2021, respectively.
Other assets or liabilities of Elica PB India are not material to the Consolidated Condensed Financial Statements of the Company for the periods presented.
Both Whirlpool India and the non-controlling interest shareholders retain an option for Whirlpool India to purchase the remaining equity interest in Elica PB India for fair value, which could be material to the financial statements of the Company, depending on the performance of the business.
Adoption of New Accounting Standards
We adopted the following standard for the year ending December 31, 2022 which is not expected to have a material impact on our annual Consolidated Financial Statements:
|2021-10||Government Assistance (Topic 832) - Disclosures by Business Entities about|
|January 1, 2022|
All other newly issued and effective accounting standards during 2022 were not relevant or material to the Company.
Accounting Pronouncements Issued But Not Yet Effective
In March 2020, the FASB issued Update 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The amendments in Update 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The new guidance provides the following optional expedients: simplify accounting analyses under current U.S. GAAP for contract modifications, simplify the assessment of hedge effectiveness, allow hedging relationships affected by reference rate reform to continue and allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.
In January 2021, the FASB issued Update 2021-01, "Reference Rate Reform (Topic 848): Scope". The update provides additional optional guidance on the transition from LIBOR to include derivative instruments that use an interest rate for margining, discounting or contract price alignment. The standard will ease, if warranted, the requirements for accounting for the future effects of the rate reform. An entity may elect to apply the amendments prospectively through December 31, 2022. The standard is not expected to have a material impact on our Consolidated Financial Statements.
In September 2022, the FASB issued Update 2022-04, "Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations". The update was issued in response to requests from financial statement users for increased transparency surrounding the use of supplier finance programs. The amendments in Update 2022-04 require that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The amendments in this Update do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.
All other issued and not yet effective accounting standards are not relevant or material to the Company.
(2) REVENUE RECOGNITION
Disaggregation of Revenue
The following table presents our disaggregated revenues by revenue source. We sell products within all product categories in each operating segment. For additional information on the disaggregated revenues by geographic regions, see Note 14 to the Consolidated Condensed Financial Statements.
Three Months Ended September 30,
Nine Months Ended September 30,
|Millions of dollars||2022||2021||2022||2021|
|Major product categories:|
|Laundry||$||1,187 ||$||1,498 ||$||3,807 ||$||4,447 |
|Refrigeration||1,560 ||1,762 ||4,821 ||5,016 |
|Cooking||1,234 ||1,348 ||3,762 ||4,097 |
|Dishwashing||469 ||479 ||1,384 ||1,403 |
|Total major product category net sales ||$||4,450 ||$||5,087 ||$||13,774 ||$||14,963 |
|Spare parts and warranties||225 ||302 ||695 ||860 |
|Other||109 ||99 ||332 ||347 |
|Total net sales||$||4,784 ||$||5,488 ||$||14,801 ||$||16,170 |
The impact to revenue related to prior period performance obligations is less than 1% of global consolidated revenues for the three and nine months ended September 30, 2022.
Allowance for Expected Credit Losses and Bad Debt Expense
We estimate our expected credit losses primarily by using an aging methodology and establish customer-specific reserves for higher risk trade customers. Our expected credit losses are evaluated and controlled within each geographic region considering the unique credit risk specific to the country, marketplace and economic environment. We take into account past events, current conditions and reasonable and supportable forecasts in developing the reserve.
The following table summarizes our allowance for expected credit losses and bad debt by operating segment for the nine months ended September 30, 2022:
|Millions of dollars||December 31, 2021||Charged to Earnings||Write-offs||Foreign Currency|
|September 30, 2022|
|Accounts receivable allowance |
|North America||$||7 ||$||(1)||$||— ||$||— ||$||— ||$||6 |
|EMEA||45 ||5 ||(1)||(1)||(15)||33 |
|Latin America||43 ||1 ||(4)||1 ||— ||41 |
|Asia||3 ||— ||— ||— ||— ||3 |
|Consolidated||$||98 ||$||5 ||$||(5)||$||— ||$||(15)||$||83 |
|Financing receivable allowance|
|Latin America||$||25 ||$||— ||$||— ||$||1 ||$||— ||$||26 |
|$||25 ||$||— ||$||— ||$||1 ||$||— ||$||26 |
|Consolidated||$||123 ||$||5 ||$||(5)||$||1 ||$||(15)||$||109 |
(1) Accounts receivable allowance of our Russian operations which was previously classified under accounts receivable has been removed as part of the deconsolidation of the Russian operations. For additional information, see Note 15 to the Consolidated Condensed Financial Statements.
We recorded an immaterial amount of bad debt expense for the periods ended September 30, 2022 and December 31, 2021, respectively.
(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported within our Consolidated Condensed Statements of Cash Flows:
|Millions of dollars||2022||2021|
|Cash and cash equivalents as presented in our Consolidated Condensed Balance Sheets||$||1,794 ||$||2,875 |
|Cash, cash equivalents and restricted cash as presented in our Consolidated Condensed Statements of Cash Flows||$||1,794 ||$||2,875 |
|Millions of dollars||2021||2020|
|Cash and cash equivalents as presented in our Consolidated Balance Sheets||$||3,044 ||$||2,924 |
|Restricted cash included in prepaid and other current assets||— ||10 |
|Cash, cash equivalents and restricted cash as presented in our Consolidated Statements of Cash Flows||$||3,044 ||$||2,934 |
The following table summarizes our inventories at September 30, 2022 and December 31, 2021:
|Millions of dollars||September 30, 2022||December 31, 2021|
|Finished products||$||2,204 ||$||1,958 |
|Raw materials and work in process||680 ||759 |
|Total Inventories||$||2,884 ||$||2,717 |
(5) PROPERTY, PLANT AND EQUIPMENT
The following table summarizes our property, plant and equipment at September 30, 2022 and December 31, 2021:
|Millions of dollars||September 30, 2022||December 31, 2021|
|Land||$||67 ||$||84 |
|Buildings||1,157 ||1,249 |
|Machinery and equipment||7,742 ||8,091 |
Property, plant and equipment, net (1)
|$||2,569 ||$||2,805 |
(1) Property, plant and equipment with a net book value of $141 million associated with our Russian business has been removed as part of the deconsolidation of the Russian operations. For additional information, see Note 15 to the Consolidated Condensed Financial Statements.
During the nine months ended September 30, 2022, we disposed of land, buildings, machinery and equipment with a net book value of $21 million, compared to $10 million in the same period of 2021. The net gain on the disposals is $55 million for the nine months ended September 30, 2022 was primarily driven by a sale-leaseback transaction. The net gain on the disposals was not material for the same period of 2021.
For additional information see Note 1 to the Consolidated Condensed Financial Statements.
(6) FINANCING ARRANGEMENTS
Term Loan Agreement
On September 23, 2022, Whirlpool Corporation (the “Company”) entered into a Term Loan Agreement by and among the Company, Sumitomo Mitsui Banking Corporation (“SMBC”), as Administrative Agent and Syndication Agent and as lender, and certain other financial institutions as lenders. SMBC, BNP Paribas, ING Bank N.V., Dublin Branch, Mizuho Bank, Ltd., and Societe Generale acted as Joint Lead Arrangers and Syndication Agents; The Bank of Nova Scotia and Bank of China, Chicago Branch acted as Documentation Agents; and SMBC acted as Sole Bookrunner for the Term Loan Agreement. The Term Loan Agreement provides for an aggregate lender commitment of $2.5 billion. The Company expects to utilize proceeds from the term loan facility on a delayed draw basis to fund a majority of the $3.0 billion purchase price consideration for the Company’s acquisition from Emerson Corporation (“Emerson”) of Emerson’s InSinkErator business, as set forth in the Asset and Stock Purchase Agreement between Whirlpool and Emerson dated as of August 7, 2022 (the “Acquisition Agreement”).
The Term Loan Agreement has a commitment termination date of May 7, 2023, which may be extended by the Company for up to two consecutive three-month periods if the acquisition has not closed by that time and if the “End Date” (as defined in the Acquisition Agreement) is extended for such periods. The term loan facility is divided into two tranches: a $1 billion tranche with a maturity date 18 months following the date that funds are borrowed, and a $1.5 billion tranche with a maturity date three years following the date that funds are borrowed.
The interest and fee rates payable with respect to the term loan facility based on the Company's current debt rating are as follows: (1) the spread over SOFR for the 18-month tranche is 0.75%; (2) the spread over SOFR for the three-year tranche is 1.00%; (3) the spread over prime for both tranches is zero; and (4) the ticking fee for both tranches is 0.10%, as of the date hereof.
The Term Loan Agreement contains customary covenants and warranties including, among other things, a rolling twelve month interest coverage ratio required to be greater than or equal to 3.0 to 1.0 for each fiscal quarter. In addition, the covenants limit the Company's ability to (or to permit any subsidiaries to), subject to various exceptions and limitations: (i) merge with other companies; (ii) create liens on its property; and (iii) incur debt at the subsidiary level.
The Company expects to utilize proceeds from the term loan facility on a delayed draw basis and had no borrowings outstanding for this term loan agreement at September 30, 2022
On May 4, 2022, the Company completed its offering of $300 million in principal amount of 4.700% Senior Notes due 2032 (the “2032 Notes”), in a public offering pursuant to a registration statement on Form S-3 (File No. 333-255372). The 2032 Notes were issued under an indenture (the “Indenture”), dated March 20, 2000, between the Company, as issuer, and U.S. Bank National Association (as successor to Citibank, N.A.), as trustee. The sale of the 2032 Notes was made pursuant to the terms of an Underwriting Agreement, dated May 2, 2022 (the “Underwriting Agreement”), among the Company, as issuer, and BNP Paribas Securities Corp., Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, Mizuho Securities USA LLC and Wells Fargo Securities, LLC, as representatives of the several underwriters in connection with the offering and sales of the 2032 Notes. The 2032 Notes contain covenants that limit the Company's ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The Company used the net proceeds from the sale of the 2032 Notes to redeem $300 million aggregate principal amount of 4.700% Notes which were paid on June 1, 2022.
On April 29, 2021, the Company completed its inaugural Sustainability Bond offering of $300 million in principal amount of 2.400% Senior Notes due 2031 (the “2031 Notes”), in a public offering pursuant to a registration statement on Form S-3 (File No. 333-255372). The 2031 Notes were issued under the Indenture. The sale of the 2031 Notes was made pursuant to the terms of an Underwriting Agreement, dated April 26, 2021 (the “Underwriting Agreement”), among the Company, as issuer, and BNP Paribas Securities Corp., BofA
Securities, Inc., J.P. Morgan Securities LLC, and Wells Fargo Securities, LLC, as representatives of the several underwriters in connection with the offering and sales of the 2031 Notes. The 2031 Notes contain covenants that limit the Company's ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The Company used the net proceeds from the sale of the 2031 Notes to redeem $300 million aggregate principal amount of 4.850% senior notes which was paid June 15, 2021. Consistent with the Company’s Sustainability Bond Framework, the Company allocated an amount equal to the net proceeds from the sale of the 2031 Notes to fund new and existing environmental and social Eligible Projects, as defined in the Company’s prospectus supplement dated April 26, 2021.
On May 7, 2020, the Company completed its offering of $500 million in principal amount of 4.60% Senior Notes due 2050 (the “2050 Notes”), in a public offering pursuant to a registration statement on Form S-3 (File No. 333-224381). The 2050 Notes were issued under the Indenture. The 2050 Notes contain covenants that limit the Company's ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The Company used the net proceeds from the sale of the 2050 Notes to repay a portion of the outstanding borrowings under the Company’s revolving credit facility, as amended and restated, dated as of August 6, 2019, among the Company, certain other borrowers, the lenders referred to therein, JPMorgan Chase Bank, N.A. as administrative agent and Citibank, N.A., as syndication agent.
On February 21, 2020, Whirlpool EMEA Finance S.à r.l., an indirect, wholly-owned finance subsidiary of Whirlpool Corporation, completed a bond offering consisting of €500 million (approximately $540 million at closing) in principal amount of 0.50% Senior Notes due in 2028 (the "2028 Notes") in a public offering pursuant to a registration statement on Form S-3 (File No. 333-224381). The 2028 Notes were issued under an indenture, dated February 21, 2020, among Whirlpool EMEA Finance S.à r.l, as issuer, the Company, as parent guarantor, and U.S. Bank National Association, as trustee. Whirlpool Corporation has fully and unconditionally guaranteed the Notes on a senior unsecured basis. The 2028 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 2028 Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest.
On May 3, 2022, the Company entered into a Fifth 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. BNP Paribas, Mizuho Bank, Ltd. and Wells Fargo Bank, National Association acted as Documentation Agents. JPMorgan Chase Bank, N.A., BNP Paribas Securities Corp., Citibank, N.A., Mizuho Bank, Ltd. and Wells Fargo Securities, LLC acted as Joint Lead Arrangers and Joint Bookrunners for the Amended Long-Term Facility. Consistent with the Company’s prior credit agreement, the Amended Long-Term Facility provides an aggregate borrowing capacity of $3.5 billion.
The interest rate payable with respect to the Amended Long-Term Facility reflect a decrease of 0.125% in the interest rate margin from the Company’s prior credit facility, and will be initially, based on the Company’s current debt rating, Term SOFR (secured overnight financing rate) + 1.00% interest rate margin per annum (with a 0.10% SOFR spread adjustment) or the Alternate Base Rate + 0.00% per annum, at the Company’s election.
The Amended Long-Term Facility contains customary covenants and warranties, such as, among other things, a rolling four quarter interest coverage ratio required to be greater than or equal to 3.0 as of the end of each fiscal quarter. The Amended Long-Term Facility removes the second financial covenant, a debt-to-capitalization ratio, that was in the Company’s prior credit agreement. The Amended Long-Term Facility also includes limitations on the Company’s ability to (or to permit any subsidiaries to), subject to various exceptions and limitations: (i) merge with other companies; (ii) create liens on its property; and (iii) incur debt at the subsidiary level. Many of the lenders have in the past performed, and may in the future from time to time perform, investment banking, financial advisory, lending and/or commercial banking services, or other services for Whirlpool Corporation and its subsidiaries, for which they have received, and may in the future
receive, customary compensation and expense reimbursement. We were in compliance with our interest coverage ratio under the revolving credit facility as of September 30, 2022.
In addition to the committed $3.5 billion Amended Long-Term Facility and the $2.5 billion Delayed Draw Term Loan Agreement, we have committed credit facilities in Brazil and India. These committed credit facilities provide borrowings up to approximately $197 million at September 30, 2022 and $193 million at December 31, 2021, based on exchange rates then in effect, respectively. These committed credit facilities have maturities that run through 2023.
We had no borrowings outstanding under the committed credit facilities at September 30, 2022 and December 31, 2021, respectively.
Notes payable, which consist of short-term borrowings payable to banks or commercial paper, are generally used to fund working capital requirements. The fair value of our notes payable approximates the carrying amount due to the short maturity of these obligations.
The following table summarizes the carrying value of notes payable at September 30, 2022 and December 31, 2021:
|Millions of dollars||September 30, 2022||December 31, 2021|
|Short-term borrowings due to banks||8 ||10 |
|Total notes payable||$||8 ||$||10 |
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 do not require continuing involvement from the Company.
Certain arrangements include servicing of transferred receivables by Whirlpool. During the nine months ended September 30, 2022 and nine months ended September 30, 2021, no amounts were received from the sales of accounts receivable under these arrangements. Outstanding accounts receivable transferred under arrangements where the Company continues to service the transferred asset were not material as of September 30, 2022 and December 31, 2021, respectively.
(7) COMMITMENTS AND CONTINGENCIES
Embraco Antitrust Matters
Beginning in February 2009, our former Embraco compressor business headquartered in Brazil ("Embraco") was notified of antitrust investigations of the global compressor industry by government authorities in various jurisdictions. Embraco resolved the government investigations and related claims in various jurisdictions and certain other claims remain pending.
Whirlpool 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 consolidated 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.
Our Brazilian operations have received tax assessments for income and social contribution taxes associated with certain monetized BEFIEX credits. We do not believe BEFIEX credits are subject to income or social
contribution taxes. We believe these tax assessments are without merit and are vigorously defending our positions. We have not provided for income or social contribution taxes on these BEFIEX credits, and based on the opinions of tax and legal advisors, we have not accrued any amount related to these assessments at September 30, 2022. The total amount of outstanding tax assessments received for income and social contribution taxes relating to the BEFIEX credits, including interest and penalties, is approximately 2.1 billion Brazilian reais (approximately $390 million at September 30, 2022).
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 taxpayers 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 269 million Brazilian reais (approximately $50 million at September 30, 2022), reflecting interest and penalties to date. We believe these tax assessments are without merit and we are vigorously defending our position. The government's assessment in this case relies heavily on its arguments regarding taxability of BEFIEX credits for certain years, which we are disputing in one of the BEFIEX government assessment cases cited in the prior paragraph. Because the IPI Amnesty case is moving faster than the BEFIEX taxability case, we could be required to pay the IPI Amnesty assessment before obtaining a final decision in the BEFIEX taxability case.
We have received tax assessments from the Brazilian federal tax authorities relating to amounts allegedly due regarding unemployment/social security insurance taxes (PIS/COFINS) for tax credits recognized since 2007. These credits were recognized for inputs to certain manufacturing and other business processes. These assessments are being challenged at the administrative and judicial levels in Brazil. The total amount of outstanding tax assessments received for credits recognized for PIS/COFINS inputs is approximately 320 million Brazilian reais (approximately $59 million at September 30, 2022). We believe these tax assessments are without merit and are vigorously defending our positions. Based on the opinion of our tax and legal advisors, we have not accrued any amount related to these assessments.
In addition to the BEFIEX, IPI tax credit and PIS/COFINS inputs matters noted above, other assessments issued by the Brazilian tax authorities related to indirect and income tax matters, and other matters, are at various stages of review in numerous administrative and judicial proceedings. The amounts related to these assessments will continue to be increased by monetary adjustments at the Selic rate, which is the benchmark rate set by the Brazilian Central Bank. In accordance with our accounting policies, we routinely assess these matters and, when necessary, record our best estimate of a loss. We believe these tax assessments are without merit and are vigorously defending our positions.
Litigation is inherently unpredictable and the conclusion of these matters may take many years to ultimately resolve. 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.
In 2013, the French Competition Authority ("FCA") commenced an investigation of appliance manufacturers and retailers in France, including Whirlpool and Indesit. The FCA investigation was split into two parts, and in December 2018, we finalized a settlement with the FCA on the first part of the investigation. The second part of the FCA investigation, which is expected to focus primarily on manufacturer interactions with retailers, is ongoing. The Company is cooperating with this investigation.
Although it is currently not possible to assess the impact, if any, that matters related to the FCA investigation may have on our financial statements, matters related to the FCA investigation could have a material adverse effect on our financial statements in any particular reporting period.
Trade Customer Insolvency
The Company was a former indirect minority shareholder of Alno AG, a longstanding trade customer that filed for insolvency protection in Germany. In 2020, we paid a settlement of €52.75 million (approximately $59
million at the time of payment) to resolve any potential claims the insolvency trustee might have against the Company. We are also defending third-party claims related to Alno's insolvency that we believe are without merit, and believe the ultimate resolution of these claims will not have a material adverse effect on our financial statements.
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 was named as a defendant in a product liability suit in Pennsylvania federal court related to this matter. The federal court dismissed the case with prejudice in September 2020 and the dismissal was affirmed on appeal in July 2022. In December 2020, lawsuits related to Grenfell Tower were filed in the U.K. against approximately 20 defendants, including Whirlpool Corporation and certain Whirlpool subsidiaries. Given the preliminary stage of the proceedings, we cannot speculate on their eventual outcomes or potential impact on our financial statements; accordingly, we have not recorded any significant charges as of September 30, 2022. Additional claims may be filed related to this incident.
See Note 13 for information on certain U.S. income tax litigation. In addition, we are currently defending against two lawsuits that have been certified for treatment as class actions in U.S. federal court, relating to two top-load washing machine models. In December 2019, the court in one of these lawsuits entered summary judgment in Whirlpool's favor. That ruling remains subject to appeal, and the other lawsuit is ongoing. We believe the lawsuits are without merit and are vigorously defending them. Given the preliminary stage of the proceedings, we cannot reasonably estimate a range of loss, if any, at this time. The resolution of these matters could have a material adverse effect on our financial statements in any particular reporting period.
We are currently vigorously defending a number of other lawsuits related to the manufacture and sale of our products which include class action allegations, and may become involved in similar actions. These lawsuits allege claims which include negligence, breach of contract, breach of warranty, product liability and safety claims, false advertising, fraud, and violation of federal and state regulations, including consumer protection laws. In general, we do not have insurance coverage for class action lawsuits. We are also involved in various other legal actions arising in the normal course of business, for which insurance coverage may or may not be available depending on the nature of the action. We dispute the merits of these suits and actions, and intend to vigorously defend them. Management believes, based upon its current knowledge, after taking into consideration legal counsel's evaluation of such suits and actions, and after taking into account current litigation accruals, that the outcome of these matters currently pending against Whirlpool should not have a material adverse effect, if any, on our financial statements. We may experience additional delays in resolving these and other pending litigation matters as a result of COVID-19-related temporary court closures and postponements.
Product Warranty and Legacy Product Corrective Action Reserves
Product warranty reserves are included in other current and other noncurrent liabilities in our Consolidated Condensed Balance Sheets. The following table summarizes the changes in total product warranty liability reserves for the periods presented:
|Millions of dollars||2022||2021|
|Balance at January 1||$||286 ||$||273 |
|Issuances/accruals during the period||171 ||258 |
|Settlements made during the period/other||(222)||(220)|
Balance at September 30
|$||235 ||$||311 |
|Current portion||$||150 ||$||211 |
|Non-current portion||85 ||100 |
|Total||$||235 ||$||311 |
In the normal course of business, we engage in investigations of potential quality and safety issues. As part of our ongoing effort to deliver quality products to consumers, we are currently investigating certain potential quality and safety issues globally. As necessary, we undertake to effect repair or replacement of appliances in the event that an investigation leads to the conclusion that such action is warranted.
As part of this process, we investigated incident reports associated with a particular component in certain Indesit-designed horizontal axis washers produced in EMEA. In January 2020, we commenced a product recall in the UK and Ireland for these EMEA-produced washers, for which the recall is ongoing. In the third quarter of 2019, we accrued approximately $105 million in estimated product warranty expense related to this matter. During the fourth quarters of 2021 and 2020, the Company released accruals of approximately $9 million and $30 million, respectively, related to this campaign. These adjustments were made based on the latest available data including take rate assumptions and unit population. These estimates are based on several assumptions which are inherently unpredictable and which we may need to materially revise in the future. Settlements related to this product recall are immaterial for the three and nine months ended September 30, 2022. The total settlements since the beginning of this campaign are approximately $62 million.
For the year ended December 31, 2019, we incurred approximately $26 million of additional product warranty expense related to our previously disclosed legacy Indesit dryer corrective action campaign in the UK. No additional material product warranty expense has been incurred subsequent to 2019. We continue to voluntarily cooperate with the UK regulator with respect to the washer and dryer actions.
We have guarantee arrangements in a Brazilian subsidiary. For certain creditworthy customers, the subsidiary guarantees customer lines of credit at commercial banks to support purchases following its normal credit policies. If 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, 2022 and December 31, 2021, the guaranteed amounts totaled 0.8 billion Brazilian reais (approximately $149 million at September 30, 2022) and 1.2 billion Brazilian reais (approximately $212 million at December 31, 2021), respectively. The fair value of these guarantees were nominal at September 30, 2022 and December 31, 2021. Our subsidiary insures against a significant portion of this credit risk for these guarantees, under normal operating conditions, through policies purchased from high-quality underwriters.
We provide guarantees of indebtedness and lines of credit for various consolidated subsidiaries. The maximum contractual amount of indebtedness and lines of credit available under these lines for consolidated subsidiaries totaled approximately $2.7 billion at September 30, 2022 and $3.3 billion at December 31, 2021, respectively. Our total short-term outstanding bank indebtedness under guarantees was nominal at both September 30, 2022 and December 31, 2021.
(8) PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The following table summarizes the components of net periodic pension cost and the cost of other postretirement benefits for the periods presented:
|Three Months Ended September 30, |
|Millions of dollars||2022||2021||2022||2021||2022||2021|
|Service cost||$||1 ||$||1 ||$||1 ||$||1 ||$||— ||$||— |
|Interest cost||20 ||20 ||4 ||4 ||1 ||1 |
|Expected return on plan assets||(36)||(39)||(8)||(9)||— ||— |
|Actuarial loss||14 ||17 ||2 ||4 ||— ||— |
|Prior service credit||— ||— ||— ||— ||(12)||(12)|
|Settlement and curtailment (gain) loss||2 ||2 ||— ||— ||— ||— |
|Net periodic benefit cost (credit)||$||1 ||$||1 ||$||(1)||$||— ||$||(11)||$||(11)|
|Nine Months Ended September 30, |
|Millions of dollars||2022||2021||2022||2021||2022||2021|
|Service cost||$||2 ||$||2 ||$||3 ||$||4 ||$||— ||$||— |
|Interest cost||61 ||58 ||12 ||11 ||4 ||4 |