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Cash flow from investing activities

Analyzing cash flow at Whirlpool Corp.

The following excerpt is from Whirlpool Corporation's Form 10-K for 2006.

Maytag Acquisition
On March 31, 2006, we completed our acquisition of Maytag. The aggregate purchase price for Maytag was approximately $1.9 billion, including approximately $848 million of cash and approximately 9.7 million shares of Whirlpool common stock. . . . In addition, we assumed Maytag's existing debt of approximately $973 million. We incurred approximately $102 million in acquisition-related expenses, which are included in the purchase price above. Initially, we borrowed amounts required to fund the cash portion of the purchase price through issuances in the U.S. commercial paper market and, in June 2006, refinanced a portion of this commercial paper through the issuance of long-term bonds. On September 6, 2006, we completed the sale of the Amana commercial microwave oven business to Aga Foodservice Inc. for approximately $49 million. . . .On October 23, 2006, we completed the sale of the Dixie-Narco vending systems business to Crane Co.
for approximately $46 million. . . .

The following exhibit shows Whirlpool's statement of cash flows for 2006.

Whirlpool Corporation Consolidated Statements of Cash Flow
Operating Activities of Continuing Operations
Net earnings (loss) $ 433
Loss from discontinued operations 53
Earnings from continuing operations 486
Equity in earnings (loss) of affiliated companies 5
Loss (gain) on disposition of assets (4)
Loss (gain) on disposition of businesses (32)
Depreciation and amortization 550
Trade receivables 50
Inventories (118)
Accounts payable 44
Restructuring charges, net of cash paid (80)
Taxes deferred and payable, net (154)
Accrued pension 53
Accrued payroll and other compensation 25
Other assets and liabilities, net 55
Cash provided by continuing operating activities 880

Investing Activities of Continuing Operations
Capital expenditures (576)
Proceeds from sale of assets 86
Proceeds from sale of business 36
Purchase of minority interest shares (53)
Proceeds from Maytag adjacent businesses 110
Acquisitions of businesses, less cash acquired (797)
Cash used for investing activities of continuing operations (1,194)

Financing Activities of Continuing Operations
Net proceeds (repayments) of short-term borrows 381
Proceeds of long-term debt 757
Repayments of long-term debt (1,046)
Dividends paid (130)
Common stock issued under stock plans 54
Other financing activities, net 13
Cash provided by financing activities of continuing operations 29
Cash provided by (used for) discontinued operations
Operating activities 8
Investing activities (3)
Cash provided by discontinued operations 5
Effect of exchange rate changes on cash and equivalents 18
Increase (decrease) in cash and equivalents (262)
Cash and equivalents at beginning of year 524
Cash and equivalents at end of year $ 262


A. Whirlpool revealed that it sold Aga Foodservice Inc. for approximately $49 million and Dixie-Narco vending systems for approximately $46 million. Both of these companies were part of Maytag. How much did Whirlpool receive from the sale of portions of Maytag in addition to the amounts it received from selling Aga Foodservice and Dixie-Narco?
B. After taking into consideration the cash received from selling off parts of Maytag, how much cash did Whirlpool pay for the Maytag acquisition in 2006? Assume that the Maytag acquisition was Whirlpool's only major acquisition for 2006.
C. Whirlpool discussed some of the financing arrangements it entered into as a result of the Maytag acquisition. Ignoring those comments and focusing only on the company's statement of cash flows for the entire year of 2006, what appears to be the primary source of the cash that Whirlpool used to buy Maytag?

When answering requirements a) - c) please keep in mind your focus is solely on the statement of cash flows information provided. Do NOT use ANY of the amounts provided in the 10-K disclosure as that is solely for informational purposes and includes non-cash amounts. Also, make sure to use the template I created and uploaded in Course Materials.

Part A is asking how much proceeds (i.e. cash) did Whirlpool receive above and beyond the amounts they received for AGA ($49m) and Dixie-Narco ($46) from the sale of Maytag adjacent businesses (hint: look for this exact wording in the SCF).

Part B (cell B10) uses information you determined in Part A (cell B2). The key here is that Whirlpool spent cash (i.e. negative sign on SCF) to acquire Maytag but then sold off parts of Maytag and received cash. What is the net effect of the cash outflow for the initial Maytag acquisition and the subsequent cash inflow from selling parts of Maytag?

Part C asks you to determine where did the cash come from that Whirlpool used to acquire Maytag. You are looking for the largest item on the SCF that generated cash (i.e. a source of cash). The template I created lists the 3 sections of the SCF. Tell me which one generated the most cash.

NOTE: See Excel attachment that goes with Parts A, B, and C


Solution Preview

Part A is asking how much proceeds (i.e. cash) did Whirlpool receive above and beyond the amounts they received for AGA ($49m) and Dixie-Narco ($46) from the sale of Maytag adjacent businesses (hint: look for this exact wording in the SCF).

From the statement of cash flow we get the following -
Proceeds from Maytag adjacent businesses 110
This implies $110 is received from Maytag adjacent business. From this we ...

Solution Summary

The solution explains the calculation of cash flow from investing activities