<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 1-3932
WHIRLPOOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-1490038
(State of incorporation) (I.R.S. Employer
Identification No.)
2000 M-63
Benton Harbor, Michigan 49022-2692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 616/923-5000
The registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date:
Class of common stock Shares outstanding at June 30, 1995
--------------------- -----------------------------------
Common stock, par value $1 per share 73,859,110
PAGE 1 OF 21
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
WHIRLPOOL CORPORATION
---------------------
Quarter Ended June 30, 1995
INDEX OF INFORMATION INCLUDED IN REPORT
Page
----
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Statements
of Earnings 3
Consolidated Condensed Balance Sheets 5
Consolidated Condensed Statements
of Cash Flows 7
Notes to Consolidated Condensed
Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 11
PART II - OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q2Q
WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 8/10/95
THREE MONTHS ENDED June 30
(millions of dollars except share data)
Supplemental Consolidating Data
-----------------------------------------
Whirlpool Corporation Whirlpool with WFC Whirlpool Financial
(Consolidated) on an Equity Basis Corporation (WFC)
------------------- ------------------- -------------------
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Net sales $2,069 $2,013 $2,069 $2,013 $- $-
Financial services 46 37 - - 56 45
------ ------ ------ ------ --- ---
2,115 2,050 2,069 2,013 56 45
EXPENSES
Cost of products sold 1,590 1,515 1,590 1,515 - -
Selling and administrative 404 373 384 355 30 26
Financial services interest 17 12 - - 20 15
Intangible amortization 8 6 8 6 - -
Gain on disposition - (34) - (34) - -
Restructuring costs - 4 - 4 - -
------ ------ ------ ------ --- ---
2,019 1,876 1,982 1,846 50 41
------ ------ ------ ------ --- ---
OPERATING PROFIT 96 174 87 167 6 4
OTHER INCOME (EXPENSE)
Interest and sundry 2 8 - 5 2 3
Interest expense (34) (26) (31) (23) - -
------ ------ ------ ------ --- ---
EARNINGS BEFORE TAXES
AND OTHER ITEMS 64 156 56 149 8 7
Income Taxes 27 81 24 79 3 2
------ ------ ------ ------ --- ---
EARNINGS BEFORE EQUITY EARNINGS
AND OTHER ITEMS 37 75 32 70 5 5
Equity in WFC - - 4 4 - -
Equity in affiliated companies 16 12 16 12 - -
Minority interests (1) (3) - (2) (1) (1)
------ ------ ------ ------ --- ---
NET EARNINGS $ 52 $ 84 $ 52 $ 84 $ 4 $ 4
====== ====== ====== ====== === ====
Per share of Common Stock:
Primary earnings $ 0.70 $ 1.10
====== ======
Fully diluted earnings $ 0.70 $ 1.09
====== ======
Cash dividends $0.340 $0.305
====== ======
</TABLE>
See notes to consolidated condensed financial statements
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q2Y
WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 8/10/95
SIX MONTHS ENDED June 30
(millions of dollars except share data)
Supplemental Consolidating Data
-----------------------------------------
Whirlpool Corporation Whirlpool with WFC Whirlpool Financial
(Consolidated) on an Equity Basis Corporation (WFC)
------------------- ------------------- -------------------
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Net sales $4,008 $3,845 $4,008 $3,845 $ - $-
Financial services 92 75 - - 108 89
------ ------ ------ ------ ---- ---
4,100 3,920 4,008 3,845 108 89
EXPENSES
Cost of products sold 3,028 2,880 3,028 2,880 -
Selling and administrative 800 720 756 685 60 49
Financial services interest 33 25 - - 38 30
Intangible amortization 14 11 14 11 - -
Gain on disposition - (34) - (34) - -
Restructuring costs - 4 - 4 - -
------ ------ ------ ------ ---- ---
3,875 3,606 3,798 3,546 98 79
------ ------ ------ ------ ---- ---
OPERATING PROFIT 225 314 210 299 10 10
OTHER INCOME (EXPENSE)
Interest and sundry - 9 (6) 6 6 3
Interest expense (63) (53) (58) (48) - -
------ ------ ------ ------ ---- ---
EARNINGS BEFORE TAXES
AND OTHER ITEMS 162 270 146 257 16 13
Income Taxes 66 127 60 123 6 4
------ ------ ------ ------ ---- ---
EARNINGS BEFORE EQUITY EARNINGS
AND OTHER ITEMS 96 143 86 134 10 9
Equity in WFC - - 8 7 - -
Equity in affiliated companies 34 15 34 15 - -
Minority interests (3) (7) (1) (5) (2) (2)
------ ------ ------ ------ ---- ---
NET EARNINGS $ 127 $ 151 $ 127 $ 151 $ 8 $ 7
====== ====== ====== ====== ==== ===
Per share of Common Stock:
Primary earnings $ 1.70 $ 2.00
====== ======
Fully diluted earnings $ 1.68 $ 1.97
====== ======
Cash dividends $0.680 $0.610
====== ======
</TABLE>
See notes to consolidated condensed financial statements
4
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- --------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS File: 8SQ1695.XLS
WHIRLPOOL CORPORATION AND SUBSIDIARIES JLA 7/31/95
(millions of dollars)
Supplemental Consolidating Data
--------------------------------------------------
Whirlpool Corporation Whirlpool with WFC Whirlpool Financial
(Consolidated) on an Equity Basis Corporation (WFC)
------------------------ ------------------------ ------------------------
June 30 December 31 June 30 December 31 June 30 December 31
1995 1994 1995 1994 1995 1994
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 128 $ 72 $ 113 $ 51 $ 15 $ 21
Trade receivables, less allowances
(1995: $42; 1994; $38) 1,219 1,001 1,219 1,001 - -
Financing receivables and leases,
less allowances
(1995: $11; 1994: $15) 948 866 - - 948 866
Inventories 1,131 838 1,131 838 - -
Other current assets 306 301 307 287 7 14
------ ------ ------ ------ ------ ------
TOTAL CURRENT ASSETS 3,732 3,078 2,770 2,177 970 901
Investments and other assets 765 690 1,029 943 - -
Financing receivables and leases,
less allowances
(1995: $25; 1994: $31) 717 717 - - 717 717
Intangibles, net 930 730 930 730 - -
------ ------ ------ ------ ------ ------
2,412 2,137 1,959 1,673 717 717
Property, plant and equipment 3,361 3,101 3,333 3,075 28 26
Accumulated depreciation (1,803) (1,661) (1,785) (1,645) (18) (16)
------ ------ ------ ------ ------ ------
1,558 1,440 1,548 1,430 10 10
------ ------ ------ ------ ------ ------
TOTAL ASSETS $7,702 $6,655 $6,277 $5,280 $1,697 $1,628
====== ====== ====== ====== ====== ======
</TABLE>
See notes to consolidated condensed financial statements
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS File: 8SQ1695.XLS
WHIRLPOOL CORPORATION AND SUBSIDIARIES JLA 7/31/95
(millions of dollars)
Supplemental Consolidating Data
--------------------------------------------------
Whirlpool Corporation Whirlpool with WFC Whirlpool Financial
(Consolidated) on an Equity Basis Corporation (WFC)
------------------------ ------------------------ ------------------------
June 30 December 31 June 30 December 31 June 30 December 31
1995 1994 1995 1994 1995 1994
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $1,977 $1,201 $ 939 $ 262 $1,038 $ 939
Accounts payable 871 843 826 795 53 48
Other current liabilities 840 944 838 924 2 20
------ ------ ------ ------ ------ ------
TOTAL CURRENT LIABILITIES 3,688 2,988 2,603 1,981 1,093 1,007
Long-term debt 1,016 885 864 703 152 182
Other liabilities 971 964 858 853 113 111
------ ------ ------ ------ ------ ------
1,987 1,849 1,722 1,556 265 293
Minority interests 166 95 91 20 75 75
STOCKHOLDERS' EQUITY
Common Stock 80 80 80 80 8 8
Paid-in capital 220 214 220 214 26 26
Retained earnings 1,831 1,754 1,831 1,754 228 220
Unearned restricted stock (7) (8) (7) (8) - -
Currency translation adjustments (28) (93) (28) (93) 2 (1)
Treasury stock - at cost (235) (224) (235) (224) - -
------ ------ ------ ------ ------ ------
TOTAL STOCKHOLDERS' EQUITY 1,861 1,723 1,861 1,723 264 253
------ ------ ------ ------ ------ ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,702 $6,655 $6,277 $5,280 $1,697 $1,628
====== ====== ====== ====== ====== ======
</TABLE>
See notes to consolidated condensed financial statements
6
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
WHIRLPOOL CORPORATION AND SUBSIDIARIES
SIX MONTHS ENDED JUNE 30
(millions of dollars) Supplemental Consolidating Data
---------------------------------------------
Whirlpool Corporation Whirlpool with WFC Whirlpool Financial
(Consolidated) on an Equity Basis Corporation (WFC)
--------------------- --------------------- ---------------------
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 127 $ 151 $ 127 $ 151 $ 8 $ 7
Equity in net earnings of affiliated
companies, less dividends received (27) (13) (27) (13) - -
Equity in net earnings of WFC - - (8) (7) - -
Gain on disposition - (34) - (34) - -
Depreciation and amortization 164 150 150 135 14 15
Provision for doubtful accounts 19 15 4 5 15 10
Restructuring spending (35) - (35) - - -
Change in receivables (141) (228) (141) (228) - -
Change in inventories (225) (165) (225) (165) - -
Change in payables (15) 21 (13) 26 (2) (5)
Other operating activities (79) 21 (68) 35 (11) (14)
-------- -------- -------- -------- -------- --------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (212) (82) (236) (95) 24 13
INVESTING ACTIVITIES
Net additions to properties (172) (132) (170) (131) (2) (1)
Financing receivables originated (1,655) (1,381) - - (1,655) (1,381)
Principal payments received on financing
receivables and leases 1,576 1,500 - - 1,576 1,500
(Acquisition)/Disposition of businesses,
less cash acquired (98) 80 (98) 80 - -
Other investing activities (16) (4) - (4) (16) -
-------- -------- -------- -------- -------- --------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (365) 63 (268) (55) (97) 118
FINANCING ACTIVITIES
Proceeds of short-term borrowings 7,594 6,160 3,264 2,238 4,330 3,922
Repayments of short-term borrowings (6,874) (6,015) (2,653) (2,001) (4,221) (4,014)
Proceeds of long-term debt 75 6 106 27 - -
Repayments of long-term debt (61) (117) (59) (117) (33) (21)
Repayments of non-recourse debt (9) (9) - - (9) (9)
Dividends paid (50) (45) (50) (45) - -
Purchase of treasury stock (35) - (35) - - -
Other financing activities (7) 11 (7) 11 - -
-------- -------- -------- -------- -------- --------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 633 (9) 566 113 67 (122)
-------- -------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 56 (28) 62 (37) (6) 9
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 72 88 51 81 21 7
-------- -------- -------- -------- -------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 128 $ 60 $ 113 $ 44 $ 15 $ 16
======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated condensed financial statements
7
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial statements present
information in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and applicable
rules of Regulation S-X. Accordingly, they do not include all information or
footnotes required by generally accepted accounting principles for complete
financial statements. Management believes the financial statements include all
normal recurring accrual adjustments necessary for a fair presentation.
Operating results for the six months ended June 30, 1995 do not necessarily
indicate the results that may be expected for the full year. For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's annual report for the year ended December 31, 1994.
WFC adopted Financial Accounting Standards Board Statement No. 114, "Accounting
by Creditors for Impairment of a Loan," effective January 1, 1995. The new
rules require WFC to measure impaired loans based on the present value of
expected future cash flows discounted at the loan's effective interest rate.
Adoption of the new rules had no material effect on the Company's net earnings
or financial position.
NOTE B--BUSINESS ACQUISITIONS AND DISPOSITIONS
The Company had previously announced plans to begin manufacturing and
distributing major home appliances in China. In May 1995, the Company acquired
a controlling interest in Shunde SMC Microwave Products Co., Ltd., a microwave
oven manufacturer, for about $90 million in cash. Consolidation of SMC
operating results will begin in the third quarter. SMC annual sales were about
$100 million for its fiscal year 1994. The Company has also entered into two
agreements to invest about $17 million for the majority interest in Beijing
Whirlpool Snowflake Electric Appliance Company, Limited to produce refrigerators
and about $16 million for the majority interest in Shanghai Narcissus Electric
Appliance Corp., Ltd. to produce washing machines. These two new joint ventures
will be funded over the course of the year. The Company is currently
negotiating a fourth joint venture to produce air conditioners.
In February 1995, the Company also expanded its presence in Asia by acquiring a
controlling interest in Kelvinator of India, Ltd. (KOI), a manufacturer and
marketer of refrigerators, for about $116 million in cash funded principally in
the first quarter. As the transaction involved an issue of new KOI shares, most
of the purchase price was invested as equity in KOI in support of planned plant
and product line expansion. Consolidation of KOI operating results began in the
second quarter. KOI annual sales were about $120 million for its fiscal year
1994.
8
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
These acquisitions did not have a significant impact on the consolidated
operating results for the second quarter or year-to-date. The consolidated
balance sheet at June 1995 reflects preliminary allocations of the purchase
price for each of the acquisitions.
NOTE C--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
------- -----------
(millions of dollars)
<S> <C> <C>
Finished products $1,121 $ 832
Raw materials and work in process 234 222
------ ------
Total FIFO cost 1,355 1,054
Less excess of FIFO cost
over LIFO cost 224 216
------ ------
$1,131 $ 838
====== ======
</TABLE>
NOTE D--AFFILIATED COMPANIES
Equity in the net earnings of affiliated companies is as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30
1995 1994
--------------------
(million of dollars)
<S> <C> <C>
Brazilian affiliates $37 $11
Mexican affiliate (4) 2
Other 1 2
--- ---
$34 $15
=== ===
</TABLE>
9
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E--GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
Whirlpool
Three Months North Other and with WFC on
Ended June 30 America Europe Eliminations an Equity Basis
- -------------------------------------------------------------------------------
(millions of dollars)
<S> <C> <C> <C> <C>
Revenues
1995 $1,330 $ 608 $131 $2,069
1994 $1,330 $ 584 $ 99 $2,013
Operating Profit
1995 $ 65 $ 33 $(11) $ 87
1994 $ 76 $ 86 $ 5 $ 167
Whirlpool
Six Months North Other and with WFC on
Ended June 30 America Europe Eliminations an Equity Basis
- -------------------------------------------------------------------------------
(millions of dollars)
Revenues
1995 $2,525 $1,241 $242 $4,008
1994 $2,503 $1,146 $196 $3,845
Operating Profit
1995 $ 148 $ 77 $(15) $ 210
1994 $ 167 $ 117 $ 15 $ 299
</TABLE>
WFC operations are primarily in North America.
The second quarter sale of the European compressor operation in 1994 resulted in
a $54 million gain in Europe and a $20 million loss in North America for a net
consolidated gain of $34 million.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The statements of earnings summarize operating results for the three and six
months ended June 30, 1995 and 1994. This section of Management's Discussion
highlights the main factors affecting the changes in operating results.
The accompanying financial statements include supplemental consolidating data
reflecting the Company's investment in Whirlpool Financial Corporation ("WFC")
on an equity basis rather than as a consolidated subsidiary. Management
believes this presentation provides more meaningful information about the major
home appliance and financial services businesses.
Revenues
- --------
Revenues increased 3% for the second quarter and 4% for the first half compared
to the prior year periods. Excluding the effects of currency fluctuations,
revenues decreased 1% for the second quarter and were flat for the first half
with slight increases in volume and pricing offset by product mix. North
American revenues and product shipments were essentially flat in both the second
quarter and first half while the overall industry was down slightly in both
periods. North American industry-wide shipments are currently expected to be
down about 2-3% for the full year. European revenues increased 4% for the
second quarter and 9% for the first half. Excluding the effects of currency
fluctuations, revenues were down 10% for the second quarter and 5% for the first
half primarily due to product mix. European unit volumes were down 3% in the
second quarter and were up slightly in the first half while the industry was
flat for the quarter and up slightly for the first half. European industry-wide
shipments are currently expected to be flat to down about 1% for the full year.
Price increases of approximately 1 to 3% were implemented in North America and
Europe effective January 1, 1995 in response to rising raw material and
component prices, but have not been fully realized. Financial services revenues
increased 26% for the second quarter and 22% for the first half as WFC continued
to expand its core inventory and consumer finance businesses.
Expenses
- --------
The relationship of cost of products sold to net sales deteriorated for both the
second quarter and six month period compared to 1994. North American margins
were down for both periods due to the start-up costs associated with the
production of redesigned midsize refrigerators, the difficult economic situation
in Mexico and higher raw material and component costs partially offset by price
increases. European margins were up for both the second quarter and the first
half of 1995 due to productivity improvements, continued expense control,
benefits from restructuring, price increases and currency translation partially
offset by higher raw material and component costs.
The ratio of consolidated selling and administrative expenses as a percent of
revenues increased slightly for both the second quarter and six month period.
The appliance business expense ratio for the second quarter increased from 17.6%
in 1994 to 18.6% in 1995 similar to the increase in the first half due primarily
to a planned increase in costs related to the Company's strategy to expand its
presence in Asia. North American expenses as a percent of revenue were flat as
compared to the prior periods. European expenses as a percent of revenue were
up for both the quarter and six months as compared to the prior period primarily
due to decreased sales excluding the effect of currency exchange. Financial
services expenses as a percent of the related revenue were flat for the
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
first half and down slightly for the quarter as WFC successfully transitioned to
its strategy of supporting the inventory and consumer finance business.
The Company sold its European compressor operation in 1994 resulting in a $34
million gain (refer to Cash Flow - Investing Activities).
Other Income and Expense
- ------------------------
The decrease in other income (expense) for the first half compared to the prior
year period is due primarily to foreign currency losses. However, the overall
impact of currency fluctuations in the first half was not significant due to
offsetting foreign currency gains reported elsewhere in the statement of
earnings.
The increase in interest expense compared to the prior periods is due primarily
to higher borrowing levels to fund acquisitions and restructuring spending.
Income Taxes
- ------------
The consolidated provision for income taxes as a percent of earnings before
income taxes and other items was 41% in the first half of 1995 compared to 47%
in 1994 and 42% in the second quarter 1995 compared to 52% in 1994. The higher
effective tax rate in 1994 is due primarily to a 1994 tax charge associated with
the sale of the European compressor operation. Excluding the effects of this
business disposition, the effective tax rate was up slightly from the prior
year.
Equity in Affiliated Companies
- ------------------------------
Equity earnings in affiliated companies were $16 million in the second quarter
of 1995 compared to $12 million in 1994 and $34 million in the first half of
1995 compared to $15 million in the prior year period. Refer to Note D to the
consolidated condensed financial statements.
The Company's Brazilian affiliates generated equity earnings of $20 million in
the second quarter and $37 million in the first half of 1995 compared to $8
million and $11 million in 1994 reflecting primarily the increased consumer
demand stimulated by the Brazilian government's economic plan implemented in
mid-1994. Results were also favorably affected by certain tax credit benefits,
most of which have been realized in the first half, and the consequences of the
May 1994 merger of two of the Brazilian affiliates, Brastemp S.A. and Consul
S.A., into a new entity, Multibras S.A. The merger resulted in operating
efficiencies as an outcome of consolidating selling and administrative
functions, improved utilization of prior year tax losses and more flexibility in
management of brands and products. Brazilian equity earnings in the second half
of 1995 are not expected to reach first half levels due to anticipated
moderation of economic growth and decreased tax credit benefits.
The Company's Mexican affiliate generated losses of $4 million for the second
quarter of 1995 compared to $2 million of earnings for the same period in 1994.
Reduced shipments and higher financing costs resulting from difficult economic
conditions in Mexico were partially offset by cost reductions and net
translation gains from the Peso devaluation.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Economic volatility and government economic policy changes (including those
affecting exchange rates and tariffs) continue to affect consumer purchasing
power and the appliance industry as a whole in Mexico, Brazil and the entire
Latin American region. The outlook in these regions remains uncertain.
Net Earnings
- ------------
Second quarter net earnings were $52 million or $.70 per share compared to net
earnings of $84 million or $1.10 per share in 1994. First half net earnings
were $127 million or $1.70 per share compared to net earnings of $151 million or
$2.00 per share in 1994.
CASH FLOWS
The statements of cash flows reflect the changes in cash and equivalents for the
six months ended June 30, 1995 and 1994 by classifying transactions into three
major categories: operating, investing and financing activities.
Operating Activities
- --------------------
The Company's main source of liquidity is cash from operating activities
consisting of net earnings from operations adjusted for non-cash operating items
such as depreciation and changes in operating assets and liabilities such as
receivables, inventories and payables.
Cash used for operating activities in the first half was $212 million in 1995
compared to $82 million in 1994 largely reflecting seasonal working capital
needs of the appliance business. The change from the prior year is due
primarily to 1995 restructuring spending and changes in other operating accounts
including decreased accrued expenses and higher income tax and payroll related
payments.
Investing Activities
- --------------------
The principal recurring investing activities are property additions and
investments in and collection of financing receivables and leases. Net property
additions in the first half were $172 million in 1995 compared to $132 million
in 1994. These expenditures are primarily for equipment and tooling related to
product improvements, more efficient production methods, replacement for normal
wear and tear and more stringent governmental energy and environmental
regulations. Investment in the financial services business resulted in a net
$79 million use of cash in 1995 compared to a net $119 million source of cash in
1994 reflecting the expansion of WFC's inventory and consumer finance
businesses, as well as the 1994 liquidation of WFC's discontinued commercial
loan portfolio.
The Company had previously announced plans to begin manufacturing and
distributing major home appliances in China. In May 1995, the Company acquired
a controlling interest in Shunde SMC Microwave Products Co., Ltd., a microwave
oven manufacturer, for about $90 million in cash. Consolidation of SMC
operating results will begin in the third quarter. SMC annual sales were about
$100 million for its fiscal year 1994. The Company has also entered into two
agreements to
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
invest about $17 million for the majority interest in Beijing Whirlpool
Snowflake Electric Appliance Company, Limited, to produce refrigerators, and
about $16 million for the majority interest in Shanghai Narcissus Electric
Appliance Corp., Ltd., to produce washing machines. These two new joint ventures
will be funded over the course of the year. The Company is currently negotiating
a fourth joint venture to produce air conditioners.
In February 1995, the Company also expanded its presence in Asia by acquiring a
controlling interest in Kelvinator of India, Ltd. (KOI), a manufacturer and
marketer of refrigerators, for about $116 million in cash funded principally in
the first quarter. As the transaction involved an issue of new KOI shares, most
of the purchase price was invested as equity in KOI in support of planned plant
and product line expansion. Consolidation of KOI operating results began in the
second quarter. KOI annual sales were about $120 million for its fiscal year
1994.
In April 1994, the Company sold its European compressor operation to one of the
Company's Brazilian affiliates for $106 million. The Company received seventy-
five percent of the selling price in cash at the closing date and the remainder
in June 1995. The sale resulted in a pre-tax gain of $34 million in 1994 but no
significant gain or loss after taxes.
Financing Activities
- --------------------
In December 1994, the Company announced plans to repurchase up to five percent
of its outstanding shares of common stock. The treasury shares will be used in
employee stock-option, retirement and other compensation programs and for
general corporate purposes. Through the end of June 1995, the Company had
repurchased approximately 966,000 shares for $50 million.
FINANCIAL CONDITION AND OTHER MATTERS
The financial position of the Company remains strong as evidenced by the June
30, 1995 balance sheet. The Company's total assets are $7.7 billion and
stockholders' equity is $1.9 billion.
The overall debt to invested capital ratio at June 30, 1995 was up compared to
December 31, 1994. The appliance business debt to invested capital ratio net of
cash ("debt ratio") increased from 34% to 46% due primarily to seasonal working
capital requirements, the Asian acquisitions and the effect of European currency
movements on the Company's hedging strategy. The financial services debt to
invested capital ratio was essentially flat compared to December 31, 1994. The
Company's debt continues to be rated investment grade by Moody's Investors
Service Inc., Standard and Poors and Duff & Phelps.
Various European currency swaps and forward contracts serve as a hedge of net
European currency cash flows and a portion of the Company's net assets in
Europe. Changes in the value of the swaps and forward contracts due to
movements in exchange rates are included in the currency translation component
of stockholders' equity or other income (expense) depending on whether or not
they relate to the European net asset hedge.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
WFC's financing portfolio by business segment is as follows (in millions):
<TABLE>
<CAPTION>
June 30, 1995 December 31,
1994
------------- ------------
<S> <C> <C>
Inventory $ 760 46% $ 652 41%
Aerospace 427 26 465 29
Consumer 418 25 386 24
Commercial 16 1 25 2
Other 44 2 55 4
------------ ------------
$1,665 100% $1,583 100%
============ ============
</TABLE>
The aerospace portfolio is generally secured by newer (Stage III) aircraft on
lease to various international airlines. Although the commercial airline
industry seems to be stabilizing, the near-term outlook remains uncertain.
Management believes the aerospace portfolio carrying value is appropriate. The
Company is continuing to phase out of aerospace and highly leveraged commercial
lending activities.
WFC adopted Financial Accounting Standards Board Statement No. 114, "Accounting
by Creditors for Impairment of a Loan," effective January 1, 1995. The new
rules require WFC to measure impaired loans based on the present value of
expected future cash flows discounted at the loan's effective interest rate.
Adoption of the new rules had no material effect on the Company's net earnings
or financial position.
The Company has external sources of capital available and believes it has
adequate financial resources and liquidity to meet anticipated business needs
and to fund future growth opportunities such as new products, acquisitions and
joint ventures.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
BUSINESS UNIT NET SALES AND OPERATING PROFIT
The following appliance business (WFC on an equity basis) data is presented as
supplemental information (in millions):
Sales by Business Unit were as follows:
<TABLE>
<CAPTION>
Second Quarter Better/(Worse) First Half Better/(Worse)
---------------- -------------- ---------------- --------------
1995 1994 $ % 1995 1994 $ %
------ ------ ---- --- ------ ------ ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $1,329 $1,330 $ (1) - % $2,525 $2,503 $ 22 1 %
Europe 586 561 25 4 1,201 1,102 99 9
Latin America 61 74 (13) (18) 128 149 (21) (14)
Asia 94 51 43 84 156 96 60 63
Other (1) (3) 2 67 (2) (5) 3 60
------ ------ ---- --- ------ ------ ---- ---
Total Appliance Business $2,069 $2,013 $ 56 3 % $4,008 $3,845 $163 4 %
====== ====== ==== === ====== ====== ==== ===
</TABLE>
Operating Profit by Business Unit was as follows:
<TABLE>
<CAPTION>
Second Quarter Better/(Worse) First Half Better/(Worse)
---------------- -------------- ---------------- --------------
1995 1994 $ % 1995 1994 $ %
------ ------ ---- --- ------ ------ ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $ 93 $ 133 $(40) (30)% $ 209 $ 252 $(43) (17)%
Europe 34 32 2 6 78 63 15 24
Latin America 5 12 (7) (58) 14 24 (10) (42)
Asia (12) (3) (9) N/M (23) (6) (17) N/M
Restructuring - (4) 4 N/M - (4) 4 N/M
Business Disposition - 34 (34) N/M - 34 (34) N/M
Other (33) (37) 4 11 (68) (64) (4) (6)
------ ------ ---- --- ------ ------ ---- ---
Total Appliance Business $ 87 $ 167 $(80) (48)% $ 210 $ 299 $(89) (30)%
====== ====== ==== === ====== ====== ==== ===
</TABLE>
For commentary regarding performance in North America and Europe, refer to
Results of Operations. Latin America includes Whirlpool Argentina and the
South American Sales Company (SASCO). Whirlpool Argentina results were
adversely affected by a sharp decline in appliance industry volumes, driven
primarily by a faltering economy and very tight credit. SASCO results were up,
despite being affected by pockets of economic instability. Asia had significant
shipment and revenue growth as compared to the prior year period but the
increased operating loss was due primarily to planned costs related to the
Company's strategy to expand its presence in Asia.
16
<PAGE>
PART II. OTHER INFORMATION
---------------------------
WHIRLPOOL CORPORATION AND SUBSIDIARIES
--------------------------------------
Quarter Ended June 30, 1995
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
a. The Annual Meeting of Stockholders was held on April 18, 1995 with the
following directors each elected to a term to expire in 1998 pursuant to a
stockholder vote.
<TABLE>
<CAPTION>
Broker
Nominee For Against Abstentions Nonvotes
- ------- --- ------- ----------- --------
<S> <C> <C> <C> <C>
Robert A. Burnett 64,946,424 0 243,911 0
Herman Cain 64,937,286 0 253,059 0
Allan D. Gilmour 64,956,728 0 233,607 0
Janice D. Stoney 64,943,696 0 246,639 0
David R. Whitwam 64,884,066 0 306,269 0
</TABLE>
Messrs. Bonomo, Langbo, Marohn, Marsh, Smith and Stern and Ms. Hempel each have
terms of office as directors which continued after the 1995 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
No Reports on Form 8-K were filed for the quarterly period ended June 30, 1995.
17
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WHIRLPOOL CORPORATION
(Registrant)
Bradley J. Bell
By_____________________________
Bradley J. Bell
Vice President and Treasurer
(Principal Financial Officer)
August 11, 1995
21
<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(millions of dollars except earnings per share)
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------
1995 1994
------ ------
<S> <C> <C>
Primary
Average Shares Outstanding 73.8 74.0
Treasury Method (Average Market Price)
Stock Options 0.7 1.2
Restricted Stock (RSVP) 0.3 0.3
------ ------
Primary Average Shares Outstanding 74.8 75.5
====== ======
Net Earnings $127.3 $150.7
RSVP Amortization, net of tax - 0.1
------ ------
Primary Net Earnings $127.3 $150.8
====== ======
Earnings Per Share $ 1.70 $ 2.00
====== ======
Fully Diluted
Average Shares Outstanding 73.8 74.0
Treasury Method (Average Market Price
or End of Period, whichever is greater):
Stock Options 0.9 1.4
Restricted Stock (RSVP) 0.3 0.3
Assumed Conversion of Debt 2.2 2.2
------ ------
Fully Diluted Average Shares Outstanding 77.2 77.9
====== ======
Net Earnings $127.3 $150.7
Interest Expense, net of tax 2.1 2.3
RSVP Amortization, net of tax - 0.1
------ ------
Fully Diluted Net Earnings $129.4 $153.1
====== ======
Earnings Per Share $ 1.68 $ 1.97
====== ======
</TABLE>
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SECOND QUARTER 10-Q FOR WHIRLPOOL CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 128
<SECURITIES> 0
<RECEIVABLES> 2,167
<ALLOWANCES> 53
<INVENTORY> 1,131
<CURRENT-ASSETS> 3,732
<PP&E> 3,361
<DEPRECIATION> 1,803
<TOTAL-ASSETS> 7,702
<CURRENT-LIABILITIES> 3,688
<BONDS> 1,016
<COMMON> 80
0
0
<OTHER-SE> 1,781
<TOTAL-LIABILITY-AND-EQUITY> 7,702
<SALES> 4,008
<TOTAL-REVENUES> 4,100
<CGS> 3,028
<TOTAL-COSTS> 3,061
<OTHER-EXPENSES> 14
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 162
<INCOME-TAX> 66
<INCOME-CONTINUING> 127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.68
</TABLE>
<PAGE>
EXHIBIT 99 - COMPUTATION OF THE
RATIOS OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
-------------------------------------
Appliance Financial Whirlpool
Business Services Corporation
--------- --------- -----------
<S> <C> <C> <C>
Pretax earnings $ 145.3 $ 16.6 $ 161.9
Portion of rents representative
of the interest factor 10.0 0.4 10.4
Interest on indebtedness 57.7 38.0 95.7
Amortization of debt expense
and premium 0.3 0.1 0.4
WFC preferred stock dividend - 2.3 2.3
--------- --------- -----------
Adjusted income $ 213.3 $ 57.4 $ 270.7
========= ========= ===========
Fixed charges
- -------------
Portion of rents representative
of the interest factor $ 10.0 $ 0.4 $ 10.4
Interest on indebtedness 57.7 38.0 95.7
Amortization of debt expense
and premium 0.3 0.1 0.4
WFC preferred stock dividend - 2.3 2.3
--------- --------- -----------
$ 68.0 $ 40.8 $ 108.8
========= ========= ===========
Ratio of earnings to
fixed charges 3.14 1.41 2.49
========= ========= ===========
Ratio of earnings to
fixed charges at
June 30, 1994 5.44 1.44 4.08
========= ========= ===========
</TABLE>
20
