Whirlpool's Ticking Pension Time Bomb?

by: Judy Weil

Whirlpool is in compliance with its debt covenants, but has initiated talks with banks about amending their covenants in anticipation of an even more difficult market ahead. Many companies across the spectrum are struggling to fund their employee pension funds, Whirlpool as well.

Analysts, however, questioned whether it was reasonable to continue paying a dividend in light of a significant and growing pension deficit.

From Whirlpool Corp.’s Q408 conference call: (NYSE:WHR)

Q: Can you tell us where your pension deficit actually finished the year?

A: Sure I can, Jeff. We ended the year with a deficit of $1.3 billion. As you’ll remember we came out of the year before at $500 million. So our deficit grew by about $800 million Jeff in the year. That was driven off of a negative asset return of about 20% and a lower discount rate in 2009.

Q: Roy said that you expect pension contributions of $80 million. And then had a question on your thoughts on continuing to pay the $1.72 dividend.

A: Laura, you are correct. The pension contribution for this year ’09 is estimated to be $80 million.

Regarding the dividend obviously our board determines our dividend level. We’ve made no changes to date. Amongst all the things we look at all the time, we consider it and again to date we’ve made no changes.


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