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Whirlpool Product Recall Tempers Strong Q3 Sales

10/17/2001 08:47:00 AM Eastern

Benton Harbor, Mich. - Strong brand demand and new products helped Whirlpool North America post record third-quarter sales and operating profit, but the company is recalling almost 2 million defective microwave ovens.

Operating profit climbed 37 percent for the North American segment, while this market enjoyed record third-quarter volume and higher average selling prices.

On the down side, Whirlpool announced a $300 million charge, before taxes, in the third quarter, due to the safety recall of 1.8 million over-the-range microwave oven-hood combinations. Whirlpool said defective hood exhaust fans potentially could catch fire.

The company said it is spreading the $184 million full cost of the recall over the next several quarters.

Whirlpool's recall led to a $94 net loss during the three months ended Sept. 30, compared with a $67 million profit in the same period last year. Excluding restructuring charges and the charge for the recall, the company said core earnings grew to a pro forma $101 million.

The major appliance maker reported total revenue of $2.59 billion in the third quarter, relatively flat compared with the $2.57 billion recorded in the same three months in 2000.

Whirlpool has revised its projection of a 10 percent to 15 percent increase in core earnings over the full year to 5 percent to 10 percent. The company cites the recent rise of global uncertainties and the decline in industry projections for the lowered expectations.

Based on current U.S. economic conditions and projections, Whirlpool anticipates industry unit shipments will be down 3 percent for the full year. Within this environment, the company said it continues to expect improved second-half and full-year performances for Whirlpool North America, compared with last year.

For the nine months, overall sales dropped to $7.70 billion, compared with $7.75 billion in the same period in 2000. Pro forma net earnings were $262 million, compared with $301 million in the year-ago period. Including charges, the company posted $13 million in earnings from continuing operations.

Year to date, Whirlpool said restructuring activities have resulted in a pre-tax charge of $105 million and are expected to produce savings of about $43 million in 2001. This should increase to about $84 million on an annualized basis.

In total, the company said the restructuring effort is expected to result in pre-tax charges of between $300 million to $350 million, and produce annualized savings of between $225 million and $250 million.