WHIRLPOOL CORP DE

Previous wording

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.

Current wording

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 and six months ended periods compared to the same prior-year periods. 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.

Previous wording

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.

Current wording

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 (deconsolidated as of April 1, 2024), MDA Latin America; MDA Asia; and Small Domestic Appliances ("SDA") Global.

Previous wording

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.

Current wording

Whirlpool delivered second-quarter GAAP net earnings (loss) available to Whirlpool of $219 million (net earnings margin of 5.5%), or $3.96 per share, compared to GAAP net earnings (loss) available to Whirlpool of $85 million (net earnings margin of 1.8%), or $1.55 per share in the same prior-year period. Whirlpool delivered cash provided by (used in) operating activities of $(485) million for the six months ended June 30, 2024, compared to $(370) million in the same prior year period and free cash flow (non-GAAP) of $(713) million, compared to free cash flow of $(587) million in the same prior year period.

Previous wording

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.

Current wording

Whirlpool delivered second-quarter ongoing (non-GAAP) earnings per share of $2.39 and ongoing EBIT margin of 5.3%, compared to $4.21 and 7.3% in the same prior-year period.

Previous wording

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.

Current wording

On a GAAP basis, net earnings margins were impacted by adjustments recorded in the loss on sale and disposal of businesses (see Note 14 for further information) and restructuring expenses related to organizational simplification. 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 lower income tax expense, primarily due to an overall lower level of earnings and tax benefits related to the completion of legal entity restructuring projects in connection with the disposal of our European major appliance business, partially offset by associated valuation allowances.

Previous wording

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.

Current wording

We continue to take actions to deliver shareholder value as we navigate through a challenging macro environment in North America, demonstrated by the completion of our global organizational simplification and MDA North America promotional program price increase actions. We remain confident in delivering $300-$400 million of cost take out and continued sequential margin progression through 2024.

Previous wording

(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.

Current wording

(2) As a result of the GAAP earnings loss for the six months ended June 30, 2023, and June 30, 2024, respectively, the impact of antidilutive shares was excluded from the loss per share calculation on a GAAP basis.

Previous wording

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.

Current wording

Consolidated net sales decreased 16.8% and 10.2% for the three and six months ended June 30, 2024 compared to the same periods in 2023. The decrease for the three and six months ended June 30, 2024 was primarily driven by divestiture of our European major domestic appliances business. Excluding the impact of foreign currency, net sales decreased 16.0% and 10.3% for the three and six months ended June 30, 2024, compared to the same periods in 2023.

Previous wording

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.

Current wording

The consolidated gross margin percentage for the three and six months ended June 30, 2024 decreased to 15.7% and 14.9% compared to 17.0% and 16.7% in the same prior-year periods. The decrease was primarily driven by volumeand unfavorable product price/mix, partially offset by cost productivity.

Previous wording

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.

Current wording

Beginning January 1, 2024, we are conducting our business through five operating segments, which consist of MDA North America; MDA Europe (deconsolidated as of April 1, 2024); MDA Latin America; MDA Asia; and 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.

Previous wording

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.

Current wording

EBIT decreased for the three and six months ended June 30, 2024 compared to the same periods in 2023. The decrease for the three and six months ended was primarily due to unfavorable product price/mix. EBIT margin was 6.3% and 6.0% for the three and six months ended June 30, 2024, compared to 10.1% and 10.1% for the same periods in 2023.

Previous wording

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.

Current wording

Net sales increased 11.3% and 11.7% for the three and six months ended June 30, 2024, compared to the same periods in 2023. The increase was primarily driven by increased volume, partially offset by the unfavorable impacts of foreign currency and product price/mix. Excluding the impact from foreign currency, net sales increased 14.8% and 11.8% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.

Previous wording

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.

Current wording

EBIT increased for the three and six months ended months ended June 30, 2024 compared to the same periods in 2023. The increase for the three and six months ended was primarily driven by increased volume, partially offset by unfavorable product price/mix. EBIT margin was 5.8% and 6.7% for the three and six months ended June 30, 2024, compared to 6.1% and 5.5% for the same periods in 2023.

Previous wording

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.

Current wording

Net sales increased 19.7% and 9.5% for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase was primarily driven by increased volume, partially offset by the impact of foreign currency. Excluding the impact from foreign currency, net sales increased 21.5% and 10.7% for the three and six months ended June 30, 2024 compared to the same periods in 2023.

Previous wording

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.

Current wording

EBIT increased for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase was primarily driven by increased volume and cost take out actions, partially offset by unfavorable product price/mix. EBIT margin was 6.2% and 5.4% for the three and six months ended June 30, 2024 compared to 3.5% and 3.2% for the same periods in 2023.

Previous wording

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.

Current wording

We incurred restructuring charges of $50 million and $73 million for the three and six months ended June 30, 2024 compared to $9 million and $9 million for the same periods in 2023. For additional information, see Note 11 to the Consolidated Condensed Financial Statements.

Previous wording

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

Current wording

For the full year 2024, we expect to incur approximately $75-80 million of restructuring charges, inclusive of the $73 million recorded for the six months ended June 30, 2024. Substantially all will result in cash settlement.

Previous wording

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.

Current wording

Net interest and sundry expense decreased for the three and six months ended June 30, 2024 compared to the same prior year periods in 2023. The decrease for the six months ended is primarily due to reserves for legacy EMEA legal matters recorded in the prior year.

Previous wording

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.

Current wording

Interest expense was $93 million and $183 million for the three and six months ended June 30, 2024 compared to $89 million and $164 million in the same prior year periods of 2023. The increase is primarily due to higher interest rates.

Previous wording

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.

Current wording

Our short-term potential uses of liquidity include funding our business operations, ongoing capital spending, debt repayment, and returns to shareholders. As of June 30, 2024, we had $350 million of debt maturing within the next twelve months, which we expect to pay through refinancing, free cash flow generation, cash on hand, or a combination thereof.

Previous wording

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.

Current wording

At June 30, 2024, we had cash or cash equivalents greater than 1% of our consolidated assets in Brazil (2.4%) and India (1.9%). In addition, we had third-party accounts receivable outside of the United States greater than 1% of our consolidated assets in Brazil, which represented 2.3%. We continue to monitor general financial instability and uncertainty globally.

Previous wording

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.

Current wording

The Company maintains a $3.5 billion revolving credit facility and a committed $1.5 billion term loan as of June 30, 2024. In addition to these facilities, we have committed credit facilities in Brazil and India that provide borrowings up to approximately $192 million at June 30, 2024.

Previous wording

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.

Current wording

Notes payable consists of short-term borrowings payable to banks and commercial paper, which are generally used to fund working capital requirements. At June 30, 2024, we have $778 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.

Previous wording

The following table summarizes the net increase (decrease) in cash, cash equivalents and restricted cash for the periods presented:

Current wording

The following table summarizes the net increase (decrease) in cash and cash equivalents for the periods presented:

Previous wording

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.

Current wording

Cash used in operating activities increased during the six months ended June 30, 2024 compared to the same prior year period in 2023. The increase in cash used in operating activities was primarily driven by fluctuations in working capital due to lower inventory from reduced sales volumes, along with increases in accrued expenses and deferred taxes due to the deconsolidation of MDA Europe business.

Previous wording

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.

Current wording

Cash provided by financing activities during the six months ended June 30, 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.

Previous wording

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.

Current wording

The Company had total committed credit facilities of approximately $5.2 billion at June 30, 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 $1.5 billion and $2.0 billion drawn on the committed credit facilities (representing amounts drawn on the term loan) at June 30, 2024 and December 31, 2023, respectively, which were used to fund the InSinkErator acquisition in the fourth quarter of 2022.

Previous wording

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.

Current wording

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 June 30, 2024, we had approximately $361 million outstanding under these agreements.

Previous wording

(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.

Current wording

(1)Net earnings (loss) margin is approximately 5.5% and (0.5)% for the three and six months ended June 30, 2024 compared to 1.8% and (1.0)% in the same prior year periods. Net earnings margin is calculated by dividing net earnings (loss) available to Whirlpool by consolidated net sales for the three and six months ended June 30, 2024 and June 30, 2023, respectively.

Previous wording

(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.

Current wording

(2)Ongoing EBIT margin is approximately 5.3% and 4.8% for the three and six months ended June 30, 2024 compared to 7.3% and 6.4% in the same prior year periods. Ongoing EBIT margin is calculated by dividing Ongoing EBIT by consolidated net sales for the three and six months ended ended June 30, 2024 and June 30, 2023, respectively.

Previous wording

(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.

Current wording

(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. During the second quarter of 2024, the Company executed additional restructuring actions as part of the Company's complexity reduction and organizational simplification efforts. Total costs for these actions were $50 million, primarily in employee termination costs, which were incurred within the second quarter of 2024.

Previous wording

(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).

Current wording

(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 $292 million for the six months ended June 30, 2024, of which $45 million was incurred in the second quarter of 2024. Additionally, we incurred other unique transaction related costs related to portfolio transformation for a total of $17 million for the six months ended June 30, 2024, of which $5 million was incurred in the second quarter of 2024. These transaction costs are recorded in Selling, General and Administrative expenses on our Consolidated Condensed Statements of Comprehensive Income (Loss).

Previous wording

(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.

Current wording

(c)LEGACY MDA EUROPE LEGAL MATTERS - During the second quarter of 2023, the Company accrued $36 million related to the Competition Investigation and Trade Customer Insolvency matters of our European major domestic appliance business.

Previous wording

(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%.

Current wording

(d)NORMALIZED TAX RATE ADJUSTMENT - During the second quarter of 2024, the Company calculated a GAAP tax rate of (687)%. Ongoing earnings per share was calculated using an adjusted tax rate of (14)%, which excludes the non-tax deductible impact of M&A transactions of approximately $50 million recorded in the second quarter of 2024 and certain other tax impacts related to Europe transaction. The Company expects a full-year GAAP tax rate of approximately 25% and adjusted effective tax rate of approximately (8)%, revised from the prior quarter estimate primarily due to lower forecasted earnings before income taxes.

Previous wording

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:

Current wording

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 (8)%. We currently estimate earnings per diluted share for 2024 as follows:

Previous wording

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.

Current wording

For the full-year 2024, we expect to generate cash from operating activities of approximately $1,050 million and free cash flow of approximately $500 million, including restructuring cash outlays of approximately $75 million and capital expenditures of approximately $550 million.

Previous wording

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.

Current wording

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 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, 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.