Whirlpool 2010 Annual Report Download - page 40

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Whirlpool offers our suppliers access to a payables presentment
and settlement service (“PPS”) provided by a third party proces-
sor. This service allows our suppliers to view scheduled Whirlpool
payments online, enabling them to better manage their cash
flow and reduce payment processing costs. Independent of
Whirlpool, the PPS provider also allows suppliers to sell their
receivables to financial institutions at the sole discretion of both
the supplier and the financial institution. We have no economic
interest in the sale of these receivables and no direct relation-
ship with financial institutions concerning this service. All of
our obligations, including amounts due, remain to our suppliers
as stated in our supplier agreements. At 2010, approximately
$272 million has been sold by suppliers to participating finan-
cial institutions, compared to $145 million in 2009. If the PPS
provider or participating financial institutions were no longer
willing or able to purchase the receivables from our suppliers,
the suppliers may seek to renegotiate supply terms with us,
which may affect the timing of our cash flows.
In September 2009, we entered into a settlement agreement
with the Brazilian competition commission that requires us to
make payments totaling 100 million Brazilian reais. The pay-
ments are to be made in twelve equal semiannual installments
of approximately $5 million through 2015, totaling approxi-
mately $56 million. As of December 31, 2010, approximately
$15 million of this amount had been paid.
In September 2010, we entered into a plea agreement with the
United States Department of Justice that requires us to pay a
fine totaling $91.8 million to the United States government. The
amount will be paid in one initial installment of $16.8 million
plus accrued interest and five additional annual installments of
$15 million each, plus accrued interest. The first installment of
$16.8 million plus accrued interest was paid in January 2011.
Cash Flows from Investing Activities
Cash used in investing activities in 2010 was $606 million,
an increased outflow of $107 million compared to 2009. The
increase in cash used in investing activities was primarily due to
increased capital spending to support new products and innova-
tion, the purchase of a brand and lower proceeds from the sale
of assets. Cash used in investing activities in 2009 was $499
million compared to an outflow of $433 million in 2008. The
increase in cash used in investing activities in 2009 was pri-
marily due to lower proceeds from the sale of assets in 2009
and higher investments primarily associated with business
acquisition activity in our international locations.
The goal of our global operating platform is to enhance our
competitive position in the global home appliance industry by
reducing costs, driving productivity and quality improvements,
and accelerating our rate of innovation. We plan to continue our
comprehensive worldwide effort to optimize our regional manu-
facturing facilities, supply base, product platforms and technol-
ogy resources to better support our global products, brands and
customers. We intend to make additional investments to improve
our competitiveness in 2011, including capital spending of
between $600 and $650 million.
Cash Flows from Financing Activities
Cash used in financing activities in 2010 was $495 million
compared to a $144 million inflow in 2009. The decrease was
primarily due to a decrease in proceeds from long-term borrow-
ings and the repayment of long-term debt. During 2010, we
repaid $379 million of long-term debt and reduced short-term
debt by $20 million. In addition, we paid dividends to common
stockholders totaling $132 million, and received proceeds from
the issuance of common stock related to option exercises of
$72 million.
Cash provided by financing activities in 2009 was an inflow of
$144 million compared to an inflow of $141 million in 2008.
Cash provided by financing activities in 2009 includes proceeds
received related to two debt offerings totaling $850 million while
2008 includes proceeds received related to the issuance of
$500 million of 5.5% notes due March 1, 2013. In addition,
2009 includes net repayments of short-term borrowings and
long-term debt repayments totaling $572 million compared
to net repayments of $30 million in 2008. During 2009, we
paid dividends to common stockholders totaling $128 million,
paid debt financing fees of $38 million and received proceeds
from the issuance of common stock related to option exercises
of $21 million. During 2008, we repurchased stock totaling
$247 million, paid dividends to common stockholders totaling
$128 million and received proceeds from the issuance of com-
mon stock related to option exercises of $21 million.
Financing Arrangements
We have a $1.35 billion committed credit facility maturing on
August 13, 2012 which includes a $200 million letter of credit
sub-facility. Borrowings under the credit facility are available to
us and designated subsidiaries for general corporate purposes,
including commercial paper support. Subsidiary borrowings under
this facility, if any, are guaranteed by Whirlpool Corporation.
Interest under the credit facility accrues at a variable annual rate
based on LIBOR plus a margin or the prime rate plus a margin.
The margin is dependent on our credit rating at that time. The
credit facility requires us to meet certain leverage and interest
coverage requirements. We will incur a commitment fee for any
unused portion of the credit facility which is based on Whirlpool’s
credit rating. At December 31, 2010 and 2009, we had no
borrowings outstanding under this credit agreement and are in
compliance with financial covenant requirements.
We also had a $522 million committed credit facility which
expired on December 1, 2010. At the expiration date and at
December 31, 2009, we had no borrowings outstanding under
this credit agreement and were in compliance with financial
covenant requirements.
In 2009, we completed a debt offering comprised of (1) $350
million aggregate principal amount of 8.0% notes due May 1,
2012 and (2) $500 million aggregate principal amount of 8.6%
notes due May 1, 2014. If we experience a downgrade in our
credit ratings, the notes are subject to an increase in the interest
rate, resulting in higher interest payments. The notes contain
customary covenants that limit our ability to incur certain liens
or enter into certain sale and lease-back transactions. In addi-
tion, 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.