Whirlpool Corp: Form 10-Q for the period ended Mar 31, 2024

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition of the Company and generally discusses the results of operations for the current three months ended period compared to the same prior-year period. MD&A is provided as a supplement to, and should be read in connection with, the Consolidated Condensed Financial Statements and Notes to the Consolidated Condensed Financial Statements included in this Form 10-Q.

Certain references to particular information in the Notes to the Consolidated Condensed Financial Statements are made to assist readers.

ABOUT WHIRLPOOL

Whirlpool Corporation ("Whirlpool") is a leading kitchen and laundry appliance company, in constant pursuit of improving life at home and inspiring generations with our brands. The company is driving meaningful innovation to meet the evolving needs of consumers through its iconic brand portfolio, including Whirlpool, KitchenAid, JennAir, Maytag, Amana, Brastemp, Consul, and InSinkErator. In 2023, the Company reported approximately $19 billion in annual sales, 59,000 employees, and 55 manufacturing and technology research centers. Beginning January 1, 2024, we are conducting our business through five operating segments, which consist of Major Domestic Appliances ("MDA") North America; MDA Europe, MDA Latin America; MDA Asia; and Small Domestic Appliances ("SDA") Global.

OVERVIEW

Whirlpool delivered first-quarter GAAP net earnings (loss) available to Whirlpool of $(259) million (net earnings margin of (5.8)%), or $(4.72) per share, compared to GAAP net earnings (loss) available to Whirlpool of $(179) million (net earnings margin of (3.9)%), or $(3.27) per share in the same prior-year period. Whirlpool delivered cash provided by (used in) operating activities of $(873) million for the three months ended March 31, 2024, compared to $(477) million in the same prior year period and free cash flow (non-GAAP) of $(988) million, compared to free cash flow of $(573) million in the same prior year period.

Whirlpool delivered first-quarter ongoing (non-GAAP) earnings per share of $1.78 and ongoing EBIT margin of 4.3%, compared to $2.66 and 5.4% in the same prior-year period.

On a GAAP basis, net earnings margins were impacted by a non-cash charge related to the held for sale treatment for EMEA (see Note 14 for further information) and other EMEA transaction costs. On a GAAP and ongoing basis, quarterly results were impacted by negative price/mix, partially offset by cost takeout actions. On a GAAP basis net earnings were also impacted by higher income tax expense primarily due to the sale of minority shares in Whirlpool of India and related capital gains, and legal entity restructuring tax impacts. Ongoing earnings per share results were also impacted from tax benefits related to the closure of the Europe transaction.

We continue to take actions to deliver shareholder value as we navigate through a challenging macro environment, demonstrated by a strong cadence of new product introductions, and previously announced increase of MDA North America promotional program prices alongside $300 to $400 million of 2024 cost take out actions. We also completed a major milestone of our portfolio transformation, with the closing of the Europe transaction on April 1, 2024.

For additional information regarding non-GAAP financial measures, see the Non-GAAP Financial Measures section of this Management's Discussion and Analysis.

RESULTS OF OPERATIONS

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

Consolidated - Millions of dollars, except per share data

(1) Not meaningful ("nm")

(2) As a result of the GAAP earnings loss for the three months ended March 31, 2023, and March 31, 2024, respectively, the impact of antidilutive shares was excluded from the loss per share calculation on a GAAP basis.

Consolidated net sales decreased 3.4% for the three months ended March 31, 2024 compared to the same period in 2023. The decrease for the three months ended March 31, 2024 was primarily driven by unfavorable product price/mix, partially offset by favorable impacts of foreign currency and higher volume. Excluding the impact of foreign currency, net sales decreased 4.4% for the three months ended March 31, 2024, compared to the same period in 2023.

The consolidated gross margin percentage for the three months ended March 31, 2024 decreased to 14.3% compared to 16.4% in the same prior-year period. The decrease was primarily driven by unfavorable product price/mix, partially offset by favorable cost productivity.

Beginning January 1, 2024, we are conducting our business through five operating segments, which consist of Major Domestic Appliances ("MDA") North America; MDA Europe, MDA Latin America; MDA Asia; and Small Domestic Appliances ("SDA") Global. 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 13 to the Consolidated Condensed Financial Statements.

The following is a discussion of results for each of our operating segments. Each of our operating segments have been impacted by some disruptions in supply chains and distribution channels, among other macroeconomic impacts.

MDA NORTH AMERICA

Net Sales

Net sales decreased 8.1% for the three months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily driven by unfavorable impacts of product price/mix and lower industry demand. Excluding the impact from foreign currency, net sales decreased 8.1% for the three months ended March 31, 2024, compared to the same period in 2023.

EBIT decreased for the three months ended March 31, 2024 compared to the same period in 2023. The decrease for the three months ended was primarily due to unfavorable product price/mix, partially offset by cost takeout actions. EBIT margin was 5.6% for the three months ended March 31, 2024, compared to 10.1% for the same period in 2023.

MDA LATIN AMERICA

Net Sales

Net sales increased 12.0% for the three months ended March 31, 2024, compared to the same period in 2023. The increase was primarily due to increased volume, partially offset by unfavorable impacts of product price/mix. Excluding the impact from foreign currency, net sales increased 8.4% for the three months ended March 31, 2024, respectively, compared to the same period in 2023.

EBIT increased for the three months ended March 31, 2024 compared to the same period in 2023. The increase for the three months ended was primarily driven by cost take out actions, impact of foreign currency, raw material inflation and indirect tax benefit, partially offset by unfavorable product price/mix. EBIT margin was 7.8% for the three months ended March 31, 2024, compared to 4.8% for the same period in 2023.

MDA ASIA

Net Sales

Net sales decreased 2.4% for the three months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily due to unfavorable impacts of product price/mix. Excluding the impact from foreign currency, net sales decreased 1.7% for the three months ended March 31, 2024 compared to the same period in 2023.

EBIT increased for the three months ended March 31, 2024 compared to the same period in 2023. The increase was primarily driven by favorable impacts of cost take out actions, partially offset by unfavorable product price/mix. EBIT margin was 4.6% for the three months ended March 31, 2024 compared to 3.3% for the same period in 2023.

MDA EUROPE

Net Sales

Net sales decreased 5.0% for the three months ended March 31, 2024, compared to the same period in 2023. The decrease was driven by lower volume, partially offset by favorable impacts of foreign currency. Excluding the impact from foreign currency, net sales decreased 6.9% for the three months ended March 31, 2024, compared to the same period in 2023.

EBIT decreased for the three months ended March 31, 2024 compared to the same period in 2023. The decrease for the three months ended is driven by reduced volumes, increased infrastructure costs and unfavorable product price/mix, partially offset by decreased raw material inflation. EBIT margin was (1.1)% for the three months ended March 31, 2024, compared to (0.6)% for the same period in 2023.

SDA GLOBAL

Net Sales

Net sales increased 7.1% for the three months ended March 31, 2024 compared to the same period in 2023. The increase reflects higher volumes, partially offset by unfavorable impacts of product price/mix. Excluding the impact from foreign currency, net sales increased 6.5% for the three months ended March 31, 2024 compared to the same period in 2023.

EBIT increased for the three months ended March 31, 2024 compared to the same period in 2023. The increase was driven by increased cost take out actions and decreased marketing spend, partially offset by unfavorable product price/mix. EBIT margin was 18.1% for the three months ended March 31, 2024 compared to 11.2% for the same period in 2023.

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:

(1) Effective January 1st, 2024, we reorganized our operating segment structure. All prior period amounts have been reclassified to conform with current period presentation. For additional information, see Note 13 to the Consolidated Condensed Financial Statements.

Consolidated selling, general and administrative expenses were flat for the three months ended March 31, 2024 compared to the same period in 2023.

For additional information, see Note 1 to the Consolidated Condensed Financial Statements.

Restructuring

We incurred restructuring charges of $23 million for the three months ended March 31, 2024 compared to none for the same period in 2023. For additional information, see Note 11 to the Consolidated Condensed Financial Statements.

For the full year 2024, we expect to incur approximately $50 million of restructuring charges, of which substantially all will result in cash settlement.

(Gain) Loss on Sale and Disposal of Businesses

In the first quarter of 2024, we incurred a loss on sale and disposal of $247 million compared to $222 million in the same period of 2023. Both amounts were related to the divestiture of our European major domestic appliance business and were primarily due to fair value fluctuations driven by seasonality of net working capital, and transaction costs. The aggregate loss recorded for the European major domestic appliance transaction since the fourth quarter of 2022 is $1.9 billion.

For additional information, see Note 14 to the Consolidated Condensed Financial Statements.

Interest and Sundry (Income) Expense

Net interest and sundry expense decreased for the three months ended March 31, 2024 compared to the same period in 2023. The decrease is primarily due to reserves for legacy EMEA legal matters recorded in the prior year.

Interest Expense

Interest expense was $90 million for the three months ended March 31, 2024 compared to $75 million in the same period of 2023. The increase is primarily due to an increase in short-term debt and higher interest rates.

Income Taxes

Income tax expense was $76 million for the three months ended March 31, 2024 compared to income tax expense of $68 million in the same period of 2023. The increase for the three months ended March 31, 2024 is primarily due to the sale of 24% of the shares of Whirlpool of India and related capital gains, and legal entity restructuring tax impacts. For more information, see Note 12 to the Consolidated Condensed Financial Statements.

Other Information

Our Critical Accounting Policies and Estimates for goodwill and other indefinite-lived intangibles are disclosed in Note 1 to the Consolidated Financial Statements and in Management's Discussion and Analysis of our annual report on Form 10-K for the fiscal year ended December 31, 2023.

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 Maytag and InSinkErator trademarks continue to be at risk at March 31, 2024. None of our reporting units or other indefinite-lived intangible assets are presently at risk for future impairment.

For additional information, see Note 1 to the Consolidated Condensed Financial Statements.

FINANCIAL CONDITION AND LIQUIDITY

Background

Our objective is to finance our business through operating cash flow and the appropriate mix of long-term and short-term debt. By diversifying the maturity structure, we avoid concentrations of debt, reducing liquidity risk. We have varying needs for short-term working capital financing as a result of the nature of our business. We regularly review our capital structure and liquidity priorities, which include funding innovation and growth through capital expenditures and research and development expenditures as well as opportunistic mergers and acquisitions; and providing returns to shareholders through dividends, share repurchases and maintaining our strong investment grade rating.

The Company 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. Whirlpool has historically been able to leverage its strong free cash flow generation to fund our operations, pay for any debt servicing costs and allocate capital for reinvestment in our business, funding share repurchases and dividend payments.

Our short-term potential uses of liquidity include funding our business operations, ongoing capital spending, debt repayment, and returns to shareholders. As of March 31, 2024, we had $500 million of debt maturing within the next twelve months related to the first tranche of our term loan, which we repaid in April 2024.

On February 20, 2024, Whirlpool’s wholly-owned subsidiary, Whirlpool Mauritius Limited, executed the sale of 30.4 million equity shares of Whirlpool India via an on-market trade. The transaction reduced Whirlpool’s ownership in Whirlpool India from 75% to 51%, and generated sales proceeds of approximately $462 million on settlement. The Company used transaction proceeds to reduce debt.

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.

Cash and cash equivalents

The Company had cash and cash equivalents of approximately $1.2 billion at March 31, 2024. For cash in each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and expected future foreign investments. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable United States taxes (if any) and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with the repatriation of cash due to the complexity of its hypothetical calculation.

At March 31, 2024, we had cash or cash equivalents greater than 1% of our consolidated assets in Brazil (2.0%), India (1.6%) and the United States (1.2%). In addition, we had third-party accounts receivable outside of the United States greater than 1% of our consolidated assets in Brazil and Mexico, which represented 1.5% and 1.1%, respectively. We continue to monitor general financial instability and uncertainty globally.

Revolving credit facility and other committed credit facilities

The Company maintains a $3.5 billion revolving credit facility and a committed $2.5 billion term loan. There was $2.0 billion drawn on the committed credit facilities at March 31, 2024. In addition to these facilities, we have committed credit facilities in Brazil and India that provide borrowings up to approximately $212 million at March 31, 2024.

We were in compliance with our interest coverage ratio under the revolving credit facility and term loan as of March 31, 2024. For additional information, see Note 5 to the Consolidated Condensed Financial Statements.

Notes payable

Notes payable consists of short-term borrowings payable to banks and commercial paper, which are generally used to fund working capital requirements. At March 31, 2024, we have $500 million of notes payable outstanding primarily under the revolving credit facility or commercial paper programs. For additional information, see Note 5 to the Consolidated Condensed Financial Statements.

Trade customers

We continue to review customer conditions globally. We had no material impacts from customer insolvencies during the three months ended March 31, 2024, nor do we have immediate visibility into material customer insolvency situations occurring in the future. We continue to monitor these situations, considering each geographic region, the unique credit risk specific to the country, marketplace and economic environment, and take appropriate risk mitigation steps.

For additional information on guarantees, see Note 6 to the Consolidated Condensed Financial Statements.

Share Repurchase Program

For additional information about our share repurchase program, see Note 10 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:

Cash Flows from Operating Activities

More cash was used in operating activities during the three months ended March 31, 2024 compared to the same period in 2023. The increase in cash used in operating activities was primarily driven by lower cash earnings and fluctuations in working capital due to higher accounts receivable due to timing of shipments within the quarter and customer mix along with lower accounts payable due to reduced production volumes.

The timing of cash flows from operations varies significantly throughout the year primarily due to changes in production levels, sales patterns, promotional programs, funding requirements, credit management, as well as receivable and payment terms. Depending on the timing of cash flows, the location of cash balances, as well as the liquidity requirements of each country, external sources of funding are used to support working capital requirements.

Cash Flows from Investing Activities

Cash used in investing activities during the three months ended March 31, 2024 was comparable in each period and primarily reflects the impact of capital expenditures.

Cash Flows from Financing Activities

Cash provided by financing activities during the three months ended March 31, 2024 increased compared to the same period in 2023 primarily due to increased short-term borrowings and the sale of minority interest shares in Whirlpool India.

Financing Arrangements

The Company had total committed credit facilities of approximately $5.7 billion at March 31, 2024. These facilities are geographically reflective of the Company's global operations. The Company is confident that the committed credit facilities are sufficient to support its global operations. We had $2.0 billion drawn on the committed credit facilities (representing amounts drawn on the term loan) at March 31, 2024 and December 31, 2023, respectively, which were used to fund the InSinkErator acquisition in the fourth quarter of 2022.

For additional information about our financing arrangements, see Note 5 to the Consolidated Condensed Financial Statements.

Dividends

On February 19, 2024, our Board of Directors approved a quarterly dividend on our common stock of $1.75 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 March 31, 2024, we had approximately $407 million outstanding under these agreements.

For additional information about our off-balance sheet arrangements, see Notes 5 and 6 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 earnings per diluted share
• Ongoing EBIT margin
• Sales excluding foreign currency
• Free cash flow
• Net debt leverage

Ongoing measures, including ongoing earnings per diluted share and ongoing EBIT, 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. Management believes that Net Debt Leverage (Net Debt/Ongoing EBITDA) provides stockholders with a clearer basis to assess the Company's ability to pay off its incurred debt. 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, if any, that management believes are not indicative of the region's ongoing performance, 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.

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. The Company provides free cash flow related metrics, such as free cash flow as a percentage of net sales, as long-term management goals, not an element of its annual financial guidance, and as such does not provide a reconciliation of free cash flow to cash provided by (used in) operating activities, the most directly comparable GAAP measure, for these long-term goal metrics. Any such reconciliation would rely on market factors and certain other conditions and assumptions that are outside of the Company's control. Whirlpool does not provide a non-GAAP reconciliation for its other forward-looking long-term value creation and other goals, such as organic net sales, EBIT, and Net debt/Ongoing EBITDA, as such reconciliation would rely on market factors and certain other conditions and assumptions that are outside of the company’s control.

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 earnings (loss) available to Whirlpool, net sales, net earnings (loss) as a percentage of net sales (net earnings margin), net earnings (loss) per diluted share 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.

(1) Net earnings (loss) margin is approximately (5.8)% for the three months ended March 31, 2024 compared to (3.9)% in the same prior year period. Net earnings margin is calculated by dividing net earnings (loss) available to Whirlpool by consolidated net sales for the three months ended March 31, 2024 and March 31, 2023, respectively.

(2) Ongoing EBIT margin is approximately 4.3% for the three months ended March 31, 2024 compared to 5.4% in the same prior year period. Ongoing EBIT margin is calculated by dividing Ongoing EBIT by consolidated net sales for the three months ended March 31, 2024 and March 31, 2023, respectively.

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Footnotes

(a) RESTRUCTURING EXPENSE - In March 2024, the Company committed to workforce reduction plans. $23 million was recorded during the first quarter, of which $14 million was employee termination costs and $9 million was other associated exit costs. For the full year 2024, we expect to incur approximately $50 million of restructuring charges.

(b) IMPACT OF M&A TRANSACTIONS - On January 16, 2023, we signed a contribution agreement to contribute our European major domestic appliance business into a newly formed entity with Arçelik. In connection with the transaction, we recorded a loss on disposal of $247 million for the three months ended March 31, 2024. Additionally, we incurred other unique transaction related costs related to portfolio transformation for a total of $12 million for the three months ended March 31, 2024. These transaction costs are recorded in Selling, General and Administrative expenses on our Consolidated Condensed Statements of Comprehensive Income (Loss).

During the first quarter of 2023 we recorded an adjustment of $222 million related to the loss on disposal for the European major domestic appliance business transaction.

(c) LEGACY MDA EUROPE LEGAL MATTERS - During the first quarter of 2023, the Company accrued $62 million related to the Competition Investigation and Trade Customer Insolvency matters of our European major domestic appliance business.

(d) NORMALIZED TAX RATE ADJUSTMENT - During the first quarter of 2024, the Company calculated a GAAP tax rate of 42.9%. Ongoing earnings per share was calculated using an adjusted tax rate of 0%, which excludes the non-tax deductible impact of M&A transactions of approximately $205 million recorded in the first quarter of 2024 The Company expects a full-year GAAP tax rate of approximately 25% and adjusted effective tax rate of approximately 0%.

During the first quarter of 2023, the Company calculated a GAAP tax rate between 14.0% and 16.0%. Ongoing earnings per share was calculated using an adjusted tax rate of 15.0%

(e) SHARE COUNT ADJUSTMENT - During the first quarter of 2024 and 2023, respectively, the net earnings (loss) available to Whirlpool was a loss. Consequently any increases in the number of shares within the denominator results in a lower loss per share and is therefore antidilutive. As a result, the shares are not included in the Company's ongoing earnings per diluted share calculation.

FORWARD-LOOKING PERSPECTIVE

Earnings per diluted share presented below are net of tax. We currently estimate our anticipated 2024 full-year GAAP tax rate of approximately 25% and adjusted tax rate of approximately 0%. We currently estimate earnings per diluted share for 2024 as follows:

For the full-year 2024, we expect to generate cash from operating activities of approximately $1,150 - $1,250 million and free cash flow of approximately $550 - $650 million, including restructuring cash outlays of approximately $50 million and capital expenditures of approximately $600 million.

The table below reconciles projected 2024 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. For additional information regarding non-GAAP financial measures, see the Non-GAAP Financial Measures section of this Management's Discussion and Analysis.

(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. 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.

OTHER MATTERS

For additional information regarding certain of our loss contingencies/litigation, see Note 6 to the Consolidated Condensed Financial Statements. Unfavorable outcomes in these proceedings could have a material adverse effect on our financial statements in any particular reporting period.

Antidumping 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 large residential washers into the U.S. Those petitions resulted in orders imposing antidumping duties on certain large residential washers imported from South Korea, Mexico, and China, and countervailing duties on certain large residential washers from South Korea. In March 2019, the order covering certain large residential washers from Mexico was extended for an additional five years, and is subject to an extension proceeding in 2024. In August 2022, the order covering certain large residential washers from China was extended for an additional five years.

Raw Materials and Global Economy

The current domestic and international political environment have contributed to uncertainty surrounding the future state of the global economy. We have experienced raw material inflation in certain prior years based on the impact of U.S. tariffs and other global macroeconomic factors. Due to many factors beyond our control, including the conflict in Ukraine and related sanctions, the Israel-Palestinian conflict, the Red Sea conflict and its impact on shipping and logistics and government actions in China, among other factors, we expect to continue to be impacted by the following factors: a global shortage of certain components, such as semiconductors, a strain on raw material and input cost inflation, and fluctuations in logistics availability, timing and costs, all of which began easing in 2023 but remain volatile. This 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.

(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 March 31, 2024. 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 March 31, 2024.

(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.

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, 2023.