The Wall Street Journal - USA (2020-12-02)

THE WALL STREET JOURNAL. Wednesday, December 2, 2020 |B5

BUSINESS NEWS

then shipped the finished goods

to distribution centers to wait

for orders. “Now there’s no in-

ventory,” said Melanie Cook,

chief operating officer. “Typi-

cally our customers would be

used to placing an order, [and

in] five to seven days they can

get a product. Now we’re still

building them.”

The real-time visibility GE

Appliances was seeking in its

supply-chain plan proved criti-

cal to the company’s response

to rapid swings in demand as

consumers first hunkered down

and then sought the equipment

to outlast the lockdowns. As

people stayed home, daily usage

of appliances shot up. “We liter-

ally cannot keep up with the de-

mand. We’ve invested, added

capacity, and we’re still flat

out,” Ms. Cook said.

The new technology, from

supply-chain software provider

Blue Yonder, tracks the move-

ment of goods from manufac-

turing plants to distribution

centers. The software integrates

that data with customer orders,

using machine learning to an-

ticipate delays and shortages

and help companies decide how

to allocate limited supply.

Louisville, Ky.-based GE Ap-

pliances, which is owned by

China’sHaier Group,wasex-

panding its U.S. production ca-

pacity before the pandemic hit,

spending some $600 million

since 2018 at its nine domestic

plants and distribution centers.

Those investments include

digital upgrades that Ms. Cook

said helped the company navi-

gate its global parts supply

chain during Covid-19 and boost

output. The appliance maker in-

creased production by 25% in

the second half of the year to

meet the surging demand.

But production took a hit in

the early stages. The company

took a week in late March to re-

organize its facilities to meet

health and safety standards in

the face of Covid-19, spacing

manufacturing stations 6 feet

apart and erecting barriers.

The Blue Yonder digital up-

grade also began in March, with

the rollout of software that al-

lows GE Appliances to check

stock levels at company distri-

bution centers, track shipments

from manufacturing plants and

anticipate disruptions that

could slow customer deliveries.

The tools helped GE Appli-

ances pinpoint one cause be-

hind a rising order backlog that

came even as the company’s in-

ventory reserve was growing. It

turned out some partial ship-

ments weren’t being sent out

under procedures put in place

before the pandemic, when

some customers wouldn’t ac-

cept incomplete orders. “We are

now able to identify those and

work with our customers to re-

lease” them, a change that

wouldn’t have been possible be-

fore, a spokeswoman said.

Blue Yonder’s technology

pulls information from different

programs, such as the com-

pany’s transportation or ware-

house management systems,

and harmonizes the data so

managers can see how a de-

layed inbound shipment might

affect customer orders or in-

ventory levels. Before, “all those

entities acted independently,”

said Cary VandenAvond, the

software company’s senior vice

president of growth initiatives.

GE Applianceswasinthe

midst of a digital supply-chain

upgrade when the coronavirus

pandemic hit, disrupting global

supply lines while consumer de-

mand soared for the company’s

refrigerators and washing ma-

chines.

Instead of pausing the proj-

ect to cope with the turmoil in

retail markets, the appliance

maker accelerated the pace of

its upgrade even as a rush of

orders from people staying at

home, suddenly generating

more piles of laundry and dirty

dishes, pushed production ca-

pacity to its limits. For GE Ap-

pliances, the pandemic provided

a fertile testing ground for digi-

tal tools intended to help bal-

ance manufacturing and de-

mand by connecting parts of its

supply chain that had been op-

erating on separate tracks.

The effort took on new ur-

gency as skyrocketing orders

cleared out the appliances the

company kept on hand. Previ-

ously, the company made prod-

ucts based on demand forecasts

BYJENNIFERSMITH

GE Appliances Supply-Chain

Upgrade Eased Virus Stress

The company, which is owned by China’s Haier Group, increased production by 25% in the second half to meet the surging demand.

DAVID PAUL MORRIS/BLOOMBERG NEWS

to risk having the notice issued

by Whitebox turning into an

event of default that could

bring more serious conse-

quences. Instead, the company

unwound internal corporate as-

set maneuvers that Whitebox

had complained about, accord-

ing to Tuesday’s filing.

The company insists “there

was no breach” and still wants

a ruling on the alleged default

to clarify the correct reading of

the bond agreement at issue.

Transocean isn’t alone

among offshore drilling con-

tractors in facing severe finan-

cial strains. Several of the com-

pany’s competitors have

restructured their balance

sheets in recent months,

slammed by volatile crude

prices and the pandemic’s im-

pact on global oil demand.

The world’s largest deep-wa-

ter rig owner, Transocean is on

more solid footing than U.S. off-

shore contractor Diamond Off-

shore Drilling Inc., the U.K.’s

Noble Corp. and Valaris PLC

and Luxembourg-based Pacific

Drilling SA, all of which have

filed for bankruptcy since April.

Even before the pandemic, a

sluggish oil market had idled

many offshore fleets as ad-

vanced techniques for tapping

deep oil deposits on land led to

record oil production in the

U.S., diverting investment from

more-complex drilling offshore.

Transocean had accused

Whitebox in court papers of

waging a campaign to force an

“unnecessary bankruptcy” in

which bondholders like itself

could take equity control.

Whitebox had sued the com-

pany, hoping to stop the re-

structuring before it could

close. The judge refused and

said that if Whitebox was later

proven correct about its allega-

tions, it could be compensated

through money damages.

Creditors that made the alle-

gations of default weren’t con-

vinced it was cured, a person

familiar with the matter said.

Transocean Ltd. said it

took steps to resolve allega-

tions by bondholders that they

were treated unfairly in a re-

structuring as the offshore

drilling contractor sought to

ward off bankruptcy.

In a court filing Tuesday,

Transocean said it cured an al-

leged debt default concerning a

$1.5 billion restructuring de-

signed to keep the business

afloat during a deeply painful

period for deep-water drilling

that has sent several peer com-

panies to bankruptcy.

The restructuring, executed

in September, shaved roughly

$826 million in debt from the

Switzerland-based company’s

balance sheet. Creditors that

participated surrendered their

claims in return for roughly

$687 million in exchange bonds,

according to court records.

Whitebox AdvisorsLLC and

Pacific Investment Manage-

mentCo. held out, saying their

bondholdings had been effec-

tively leapfrogged in order of

repayment by the exchange

bonds. In September, they told

Transocean they believed the

restructuring amounted to a de-

fault. That notice gave the com-

pany 90 days, until Tuesday, to

resolve the allegation or else

risk accelerated bond repay-

ments, the loss of bank credit

and a bankruptcy filing.

The company had denied it

was in default and asked Judge

George B. Daniels of the U.S.

District Court in New York to is-

sue a court order that said so.

But Transocean elected not

BYANDREWSCURRIA

Transocean Says It

Resolved Dispute

With Bondholders

The Swiss rig owner

is one of the drilling

contractors facing

financial strains.

BUSINESS WATCH

UNITEDHEALTH

Guidance for 2020

Is Revised Upward

UnitedHealth GroupInc. re-

fined its full-year guidance for

2020 and said it expects to re-

cord a full-year profit in 2021.

The Minnetonka, Minn.,

health-insurance company now

expects full-year 2020 revenue

of about $257 billion, with ad-

justed earnings approaching

$16.75 a share. In October, the

company had said it expected

adjusted earnings of $16.50 to

$16.75 a share.

Analysts polled by FactSet

expected a full-year adjusted

profit of $16.73 a share on reve-

nue of $256.67 billion.

For 2021, UnitedHealth said it

anticipates revenue of $277 bil-

lion to $280 billion and an ad-

justed profit of $17.75 to $18.25

a share. Analysts had been pro-

jecting 2021 revenue of $278.46

billion and a profit of $18.39 a

share.

UnitedHealth said it expects

the effects of Covid-19 to reduce

about $1.80 a share from next

year’s profit figures. During its

investor day presentation, the

company said the earnings ef-

fect is largely the projected cost

of testing and treatment for

Covid-19, which it expects will

be about the same in 2021 as in

2020.

—Matt Grossman

ALEXANDRIA REAL ESTATE

Properties Occupied

Despite Pandemic

Alexandria Real Estate Equi-

tiesInc. said it will generate a

profit of $2.14 to $2.34 a share

in 2021 as its properties in the

U.S. and Canada remain mostly

occupied despite the Covid-19

pandemic.

Many companies have shifted

employees to home-based work

due to the coronavirus.

Alexandria, which leases

space to technology companies

like Facebook Inc. and pharma-

ceutical firms including Pfizer

Inc. and Novartis AG, said occu-

pancies in North America are ex-

pected to range from 96.2% to

96.8% as of Dec. 31 of next year.

Occupancies for operating prop-

erties in the market stood at

94.9% as of the end of Septem-

ber, according to the company.

Alexandria also said Tuesday

that it believes it will earn $7.60

to $7.80 a share in funds from

operations next year. FFO is an

earnings metric used by prop-

erty owners that excludes costs

such as building depreciation

and makes other adjustments.

—Micah Maidenberg

CHURCH & DWIGHT

Maker of Zicam Cold

Remedy Is Acquired

Church & DwightCo. said it

has acquired Matrixx Initiatives

Inc., the maker of the Zicam

brand cold remedy, from private-

equity firmGryphon Investors

for $530 million.

The Ewing, N.J., consumer-

products company said it fi-

nanced the deal, which it ex-

pects will boost 2021 cash

earnings by about 3%, with a

combination of cash and debt.

Church & Dwight said Zicam

is expected to have sales of

about $90 million and Ebitda of

roughly $36 million next year.

San Francisco-based Gryphon

originally invested in Matrixx in

December 2017.

—Colin Kellaher

ZIMMER BIOMET

Medical-Supply Firm

Added to Company

Zimmer Biomet HoldingsInc.

on Tuesday said it has acquired

A&E Medical Corp., a maker of

sternal-closure products, from

private-equity firmVance Street

CapitalLLC for $250 million.

The Warsaw, Ind., musculo-

skeletal health-care company

said the deal includes $150 mil-

lion in cash at closing and $100

million in cash payable next year.

Zimmer said A&E’s products

complement its portfolio and will

allow the company to offer a

comprehensive suite of sternal-

closure products, including rigid

fixation.

—Colin Kellaher

The firm expects Covid-19 to cut $1.80 a share from 2021 profit.

MIKE BLAKE/REUTERS

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