<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, 1996
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, 1996
--------------------- -----------------------------------
Common stock, par value $1 per share 74,290,510
PAGE 1 OF 22
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
WHIRLPOOL CORPORATION
---------------------
Quarter Ended June 30, 1996
INDEX OF INFORMATION INCLUDED IN REPORT
<TABLE>
<CAPTION>
Page
----
<C>
PART I - FINANCIAL INFORMATION
- ------------------------------
<C>
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 17
Security Holders
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q2Q
WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 7/24/96
THREE MONTHS ENDED June 30 Supplemental Consolidating Data
(millions of dollars except share data) -------------------------------------------------
Whirlpool Corporation Whirlpool with WFC Whirlpool Financial
(Consolidated) on an Equity Basis Corporation (WFC)
---------------------- ---------------------- -----------------------
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Net sales $ 2,229 $ 2,069 $ 2,229 $ 2,069 $ - $ -
Financial services 43 46 - - 55 56
--------- --------- --------- --------- --------- ----------
2,272 2,115 2,229 2,069 55 56
EXPENSES
Cost of products sold 1,737 1,590 1,737 1,590 - -
Selling and administrative 418 404 402 384 28 30
Financial services interest 16 17 - - 19 20
Intangible amortization 9 8 9 8 - -
--------- --------- --------- --------- --------- ----------
2,180 2,019 2,148 1,982 47 50
--------- --------- --------- --------- --------- ----------
OPERATING PROFIT 92 96 81 87 8 6
OTHER INCOME (EXPENSE)
Interest and sundry (4) 2 (5) - 1 2
Interest expense (44) (34) (41) (31) - -
--------- --------- --------- --------- --------- ----------
EARNINGS BEFORE TAXES
AND OTHER ITEMS 44 64 35 56 9 8
Income Taxes 21 27 18 24 3 3
--------- --------- --------- --------- --------- ----------
EARNINGS BEFORE EQUITY EARNINGS
AND MINORITY INTERESTS 23 37 17 32 6 5
Equity in WFC - - 5 4 - -
Equity in affiliated companies 27 16 27 16 - -
Minority interests 2 (1) 3 - (1) (1)
--------- --------- --------- --------- --------- ----------
NET EARNINGS $ 52 $ 52 $ 52 $ 52 $ 5 $ 4
========= ========= ========= ========= ======== ==========
Per share of Common Stock:
Primary earnings $ 0.70 $ 0.70
========= =========
Cash dividends $ 0.34 $ 0.34
========= =========
See notes to consolidated condensed financial statements
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q2Y
WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 7/24/96
SIX MONTHS ENDED June 30 Supplemental Consolidating Data
------------------------------------------------------
(millions of dollars except share data) Whirlpool Corporation Whirlpool with WFC Whirlpool Financial
(Consolidated) on an Equity Basis Corporation (WFC)
----------------------- ------------------------- ----------------------
1996 1995 1996 1995 1996 1995
---------- ----------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Net sales $ 4,242 $ 4,008 $ 4,242 $ 4,008 $ - $ -
Financial services 89 92 - - 109 108
-------- ------- ---------- -------- --------- --------
4,331 4,100 4,242 4,008 109 108
EXPENSES
Cost of products sold 3,300 3,028 3,300 3,028 - -
Selling and administrative 811 800 771 756 60 60
Financial services interest 32 33 - - 38 38
Intangible amortization 18 14 18 14 - -
-------- ------- ---------- -------- --------- --------
4,161 3,875 4,089 3,798 98 98
-------- ------- ---------- -------- --------- --------
OPERATING PROFIT 170 225 153 210 11 10
OTHER INCOME (EXPENSE)
Interest and sundry (1) - (7) (6) 6 6
Interest expense (84) (63) (78) (58) - -
-------- ------- ---------- -------- --------- --------
EARNINGS BEFORE TAXES
AND OTHER ITEMS 85 162 68 146 17 16
Income Taxes 39 66 33 60 6 6
-------- ------- ---------- -------- --------- --------
EARNINGS BEFORE EQUITY EARNINGS
AND MINORITY INTERESTS 46 96 35 86 11 10
Equity in WFC - - 9 8 - -
Equity in affiliated companies 41 34 41 34 - -
Minority interests 3 (3) 5 (1) (2) (2)
-------- ------- ---------- -------- --------- --------
NET EARNINGS $ 90 $ 127 $ 90 $ 127 $ 9 $ 8
======== ======= ========== ======== ========= ========
Per share of Common Stock:
Primary earnings $ 1.20 $ 1.70
======== =======
Cash dividends $ 0.68 $ 0.68
======== =======
</TABLE>
See notes to consolidated condensed financial statements
4
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
(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
1996 1995 1996 1995 1996 1995
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 141 $ 149 $ 116 $ 125 $ 25 $ 24
Trade receivables, less allowances
(1996: $40; 1995: $39) 1,154 1,031 1,154 1,031 - -
Financing receivables and leases,
less allowances
(1996: $12; 1995: $12) 1,131 1,086 - - 1,131 1,086
Inventories 1,074 1,029 1,074 1,029 - -
Other current assets 297 246 312 235 10 11
------- ------- ------- ------- ------- ------
TOTAL CURRENT ASSETS 3,797 3,541 2,656 2,420 1,166 1,121
Investments and other assets 807 777 1,075 1,046 - -
Financing receivables and leases,
less allowances
(1996: $31; 1995: $30) 736 772 - - 736 772
Intangibles, net 894 931 894 931 - -
------- ------- ------- ------- ------- ------
2,437 2,480 1,969 1,977 736 772
Property, plant and equipment 3,743 3,662 3,721 3,638 22 24
Accumulated depreciation (1,988) (1,883) (1,974) (1,867) (14) (16)
------- ------- ------- ------- ------- ------
1,755 1,779 1,747 1,771 8 8
------- ------- ------- ------- ------- ------
TOTAL ASSETS $ 7,989 $ 7,800 $ 6,372 $ 6,168 $ 1,910 $1,901
======= ======= ======= ======= ======= ======
</TABLE>
See notes to consolidated condensed financial statements
5
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
(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
1996 1995 1996 1995 1996 1995
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
----------- ----------- ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $2,232 $1,998 $1,004 $ 765 $1,228 $1,233
Accounts payable 937 977 845 896 117 81
Other current liabilities 795 854 794 844 1 10
------- ------- ------- ------- ------- --------
TOTAL CURRENT LIABILITIES 3,964 3,829 2,643 2,505 1,346 1,324
Long-term debt 932 983 838 870 94 113
Postemployment benefits 566 517 561 517 5 -
Other liabilities 440 415 318 295 122 120
------- ------- ------ ------- ------- -------
1,938 1,915 1,717 1,682 221 233
Minority interests 176 179 101 104 75 75
STOCKHOLDERS' EQUITY
Common stock 81 81 81 81 8 8
Paid-in capital 236 229 236 229 26 26
Retained earnings 1,903 1,863 1,903 1,863 236 234
Unearned restricted stock (8) (8) (8) (8) - -
Currency translation adjustments (65) (53) (65) (53) (2) 1
Treasury stock - at cost (236) (235) (236) (235) - -
------- ------- ------- ------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 1,911 1,877 1,911 1,877 268 269
------- ------- ------- ------- ------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,989 $7,800 $6,372 $6,168 $1,910 $1,901
======= ======= ======= ======= ======= ========
</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)
--------------------- ------------------ -------------------
1996 1995 1996 1995 1996 1995
--------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 90 $ 127 $ 90 $ 127 $ 9 $ 8
Equity in net earnings of affiliated
companies, less dividends received (38) (27) (38) (27) - -
Equity in net earnings of WFC, net of dividend - - (2) (8) - -
Depreciation and amortization 182 164 168 150 14 14
Provision for doubtful accounts 32 19 7 4 25 15
Restructuring spending (32) (35) (32) (35) - -
Change in receivables (145) (141) (145) (141) - -
Change in inventories (60) (225) (60) (225) - -
Change in payables (50) (15) (50) (13) - (2)
Other operating activities 36 (79) 29 (68) 7 (11)
--------- -------- ------- -------- ------- -------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 15 (212) (33) (236) 55 24
INVESTING ACTIVITIES
Net additions to properties (136) (172) (136) (170) - (2)
Financing receivables originated and leasing
assets purchased (1,907) (1,655) - - (1,907) (1,655)
Principal payments received on financing
receivables and leases 1,931 1,576 - - 1,931 1,576
Acquisition of businesses, less cash acquired (12) (98) (12) (98) - -
Other investing activities (32) (16) 15 - (47) (16)
---------- --------- ------- -------- ------- -------
CASH USED FOR INVESTING ACTIVITIES (156) (365) (133) (268) (23) (97)
FINANCING ACTIVITIES
Proceeds of short-term borrowings 8,045 7,594 3,235 3,264 4,810 4,330
Repayments of short-term borrowings (7,797) (6,874) (2,998) (2,653) (4,799) (4,221)
Proceeds of long-term debt 37 75 37 106 - -
Repayments of long-term debt (66) (61) (43) (59) (23) (33)
Repayments of non-recourse debt (9) (9) - - (9) (9)
Dividends (51) (50) (51) (50) (7) -
Purchase of treasury stock - (35) - (35) - -
Other financing activities (26) (7) (23) (7) (3) -
---------- --------- ------- ------- ------- -------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 133 633 157 566 (31) 67
---------- --------- ------- ------- ------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (8) 56 (9) 62 1 (6)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 149 72 125 51 24 21
---------- --------- ------- -------- ------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 141 $ 128 $ 116 $ 113 $ 25 $ 15
========= ======== ======= ======== ======= =======
</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, 1996 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, 1995.
NOTE B--BUSINESS ACQUISITIONS AND DISPOSITIONS
In May 1996, two of the Company's majority owned subsidiaries in India,
Kelvinator of India ("KOI") and Whirlpool Washing Machines Limited ("WWML"),
were merged and renamed Whirlpool of India ("WOI") pending final government
approval expected in the third quarter. As part of the merger plan, the Company
purchased an additional 27% interest in WWML for $12 million in April 1996 for a
total interest of 78% in WWML. The merger will result in the Company having a
56% interest in the combined entity, WOI.
During 1995, the Company expanded its presence in Asia by acquiring controlling
interests in three existing manufacturing companies and establishing three new
joint ventures.
In November 1995, the Company acquired a majority interest in Raybo Air
Conditioner Manufacturing Company ("Raybo"), a Chinese manufacturer and marketer
of air conditioners, for about $22 million in cash. Raybo annual sales were
about $20 million for its fiscal year 1994.
In May 1995, the Company acquired a majority interest in Shunde SMC Microwave
Products Co., Ltd. ("SMC"), a Chinese manufacturer and marketer of microwave
ovens, for about $90 million in cash. SMC annual sales were about $100 million
for its fiscal year 1994.
In February 1995, the Company acquired a majority interest in Kelvinator of
India, Ltd. ("KOI"), a manufacturer and marketer of refrigerators, for about
$116 million in cash funded principally in 1995. 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. 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)
The Company's new Chinese joint ventures include a $17 million majority interest
in Beijing Whirlpool Snowflake Electric Appliance Co., Ltd. to produce
refrigerators; a $16 million majority interest in Whirlpool Narcissus
("Shanghai") Co. Ltd. to produce washing machines; and a $5 million minority
interest in Beijing Embraco Snowflake Compressor Co. Ltd. to produce compressors
for refrigerators and air conditioners.
Pro forma consolidated operating results reflecting these acquisitions would not
have been materially different from reported amounts. The acquisitions have
been accounted for as purchases and their operating results have been
consolidated with the Company's results since the dates of acquisition.
NOTE C--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
(millions of dollars)
<S> <C> <C>
Finished products $1,060 $ 984
Raw materials and work in process 259 278
------ ------
Total FIFO cost 1,319 1,262
Less excess of FIFO cost
over LIFO cost 245 233
------ ------
$1,074 $1,029
====== ======
</TABLE>
NOTE D--AFFILIATED COMPANIES
Equity in the net earnings of affiliated companies is as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
---------------------
(millions of dollars)
<S> <C> <C>
Brazilian affiliates $48 $37
Mexican affiliate (8) (4)
Other 1 1
--- ---
$41 $34
=== ===
</TABLE>
9
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E--GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
(millions of dollars)
Major
Three Months North Other and Home
Ended June 30 America Europe Asia (Eliminations) Appliances
================================================================================
<S> <C> <C> <C> <C> <C>
Sales
1996 $1,490 $ 626 $128 $(15) $2,229
1995 $1,330 $ 608 $ 87 $ 44 $2,069
Operating Profit
1996 $ 125 $ (24) $(14) $ (6) $ 81
1995 $ 65 $ 33 $(12) $ 1 $ 87
Major
Six Months North Other and Home
Ended June 30 America Europe Asia (Eliminations) Appliances
================================================================================
Revenues
1996 $2,783 $1,239 $245 $(25) $4,242
1995 $2,525 $1,241 $140 $102 $4,008
Operating Profit
1996 $ 211 $ (28) $(26) $ (4) $ 153
1995 $ 148 $ 77 $(23) $ 8 $ 210
</TABLE>
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 1996. 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 8% for the second quarter and 6% for the first half compared
to the prior year periods. North American product shipments increased 11% in the
second quarter with sales up 9% while product shipments for the first half were
up 7% and sales up 8% in an industry that was up 6-7% for the first half. North
American sales improvements were due to higher volumes and price increases.
North American industry-wide shipments are currently expected to be up about 3-
4% for the full year over 1995. European unit volumes were up 15% in the second
quarter and up 8% in the first half while the industry was down about 1% for the
quarter and first half, resulting in an estimated one percentage point gain in
market share for the first half. European sales increased 3% for the second
quarter and were flat for the first half; however excluding the effects of
currency fluctuations, sales were up 8% for the second quarter and up 1% for the
first half. Sales growth reflects the significant volume increases partially
offset by consumer preference toward lower priced brands and products and no
substantial price increases for the first half of 1996. For the remainder of
1996, European industry-wide shipments are currently expected to be flat with
last year. Financial services revenues decreased 3% for the second quarter but
were up 1% for the first half as a result of a change in the mix of portfolio
assets and increased competitive pressure on yields.
Expenses
- --------
The relationship of cost of products sold to net sales deteriorated by about one
percentage point for the second quarter and by about two percentage points for
the six month period compared to 1995. North American margins were up for both
periods due to realized price increases early in the year, moderating material
costs, volume improvements and effective cost control. European margins were
down for both periods due to customers shifting to lower margin brands and
products, currency fluctuations, delays in introducing new products and stagnant
pricing in the marketplace.
Appliance selling and administrative expenses as a percent of net sales
decreased for the second quarter from 18.6% in 1995 to 18.0% in 1996 and for the
first half from 18.9% in 1995 to 18.2% in 1996. Both North American and European
expenses as a percent of sales decreased for both periods compared to the prior
periods due primarily to tight control over advertising and other spending.
Europe also benefited from cost reductions stemming from its restructuring
efforts executed during 1995. Finally, a portion of the decrease reflects the
impact of a 39% increase in Asian sales for the first half relative to its fixed
infrastructure costs established in prior years. WFC financial services expenses
as a percent of the related revenue were down for the quarter and flat
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
for the first half due to actions taken in the second quarter to reduce exposure
on a portion of the consumer financing portfolio.
Other Income and Expense
- ------------------------
The additional expense in appliance interest and sundry for both the quarter and
the first half compared to the prior year is due primarily to foreign currency
losses.
The increase in interest expense compared to the prior periods is due primarily
to higher borrowing levels to fund acquisitions and capital expenditures,
partially offset by lower interest rates.
Income Taxes
- ------------
The consolidated provision for income taxes as a percent of earnings before
income taxes and other items was 46% in the first half of 1996 compared to 41%
in 1995 and 48% in the second quarter 1996 compared to 42% in 1995. The higher
effective tax rate is primarily due to the impact of increased nondeductible
goodwill amortization on a lower level of pretax earnings and lower tax benefits
recognized on certain Asian losses. The first half effective tax rate for 1996
represents the current estimate of the full year effective tax rate.
Equity in Affiliated Companies
- ------------------------------
Equity earnings in affiliated companies were $27 million in the second quarter
of 1996 compared to $16 million in 1995 and $41 million in the first half of
1996 compared to $34 million in the prior year period.
The Company's Brazilian affiliates generated equity earnings of $31 million in
the second quarter and $48 million in the first half of 1996 compared to $20
million and $37 million in 1995, reflecting market conditions during the first
half of 1996 with the Brazilian appliance industry up about 18% over 1995
levels, largely driven by improved availability of consumer credit and
government efforts to lower interest rates. Results for the first half of 1995
were favorably affected by certain tax credit benefits.
The Company's Mexican affiliate generated equity losses of $4 million for the
second quarter of both 1996 and 1995 and losses of $8 million and $4 million for
the first half of 1996 and 1995. This performance resulted from lower shipment
volumes reflecting industry declines in Mexico as well as high financing costs
and foreign exchange losses as compared with gains in 1995. Mexican affiliate
performance is expected to benefit from a refinancing at the end of the second
quarter that will reduce financing costs.
Economic volatility and changes in government economic policy (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.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Net Earnings
- ------------
Second quarter net earnings were $52 million or $.70 per share for both 1996 and
1995. First half net earnings were $90 million or $1.20 per share compared to
net earnings of $127 million or $1.70 per share in 1995.
CASH FLOWS
The statements of cash flows reflect the changes in cash and equivalents for the
six months ended June 30, 1996 and 1995 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 generated by operating activities in the first half was $15 million in 1996
compared to $212 million used in 1995. The Company generally uses significant
cash flow in the first half of each year largely due to seasonal working capital
needs of the appliance business. The current year cash generation reflects
reduced inventory levels and favorable changes in other operating accounts
primarily due to increased accrued expenses as compared to last year, partially
offset by lower earnings and payable levels than in 1995.
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 $136 million in 1996 compared to $172 million
in 1995. These expenditures are primarily for equipment and tooling related to
product improvements, more efficient production methods and replacement for
normal wear and tear. Investment in the financial services business resulted in
a net $24 million source of cash in 1996 compared to a net $79 million use of
cash in 1995 reflecting the expansion of WFC's inventory financing portfolio
offset by the continuing liquidation of WFC's discontinued investment
portfolios. In addition, 1996 cash flows reflect the reduction of a portion of
the consumer financing portfolio in the second quarter.
In May 1996, two of the Company's majority owned subsidiaries in India,
Kelvinator of India ("KOI") and Whirlpool Washing Machines Limited ("WWML"),
were merged and renamed Whirlpool of India ("WOI") pending final government
approval expected in the third quarter. As part of the merger plan, the Company
purchased an additional 27% interest in WWML for $12 million in April 1996 for a
total interest of 78% in WWML. The merger will result in the Company having a
56% interest in the combined entity, WOI.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
In November 1995, the Company acquired a majority interest in Raybo Air
Conditioner Manufacturing Company ("Raybo"), a Chinese manufacturer and marketer
of air conditioners, for about $22 million in cash. Raybo annual sales were
about $20 million for its fiscal year 1994.
In May 1995, the Company acquired a majority interest in Shunde SMC Microwave
Products Co., Ltd. ("SMC"), a Chinese manufacturer and marketer of microwave
ovens, for about $90 million in cash. SMC annual sales were about $100 million
for its fiscal year 1994.
In February 1995, the Company acquired a majority interest in Kelvinator of
India, Ltd. ("KOI"), a manufacturer and marketer of refrigerators, for about
$116 million in cash funded principally in 1995. 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. KOI annual sales
were about $120 million for its fiscal year 1994.
The Company's new Chinese joint ventures include a $17 million majority interest
in Beijing Whirlpool Snowflake Electric Appliance Co., Ltd. to produce
refrigerators; a $16 million majority interest in Whirlpool Narcissus
("Shanghai") Co. Ltd. to produce washing machines; and a $5 million minority
interest in Beijing Embraco Snowflake Compressor Co. Ltd. to produce compressors
for refrigerators and air conditioners.
Financing Activities
- --------------------
Dividends to shareholders totaled $51 million in the first half of 1996 compared
to $50 million in 1995.
The Company's borrowings increased by $210 million during the first half of
1996, excluding the effect of currency fluctuations, primarily to fund property
additions and seasonal working capital needs. In July 1996, the Company sold
$244 million of 7 3/4% debentures maturing in 2016 and used the proceeds to pay
off short term debt.
In December 1994, the Company announced plans to repurchase up to five percent
of the 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 1996, the Company had
repurchased approximately 966,000 shares for $51 million.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
FINANCIAL CONDITION AND OTHER MATTERS
The financial position of the Company remains strong as evidenced by the June
30, 1996 balance sheet. The Company's total assets are $8.0 billion and
stockholders' equity is $1.9 billion.
The overall debt to invested capital ratio at June 30, 1996 was up compared to
December 31, 1995. The appliance business debt to invested capital ratio net of
cash ("debt ratio") increased from 43% to 46% due primarily to higher borrowing
levels to support seasonal working capital requirements, capital spending and
dividend payments. The financial services debt to invested capital ratio was
essentially flat compared to December 31, 1995. The Company's debt continues to
be rated investment grade by Moody's Investors Service Inc., Standard and Poors
and Duff & Phelps.
WFC's financing portfolio by business segment is as follows (in millions):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C> <C> <C>
Inventory $ 927 50% $ 857 46%
Consumer 424 23 531 29
Aerospace 445 24 411 22
Other 71 3 59 3
------ --- ------ ---
$1,867 100% $1,858 100%
====== === ====== ===
</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 lending activities. The increase
in the aerospace portfolio as of June 30, 1996 is a result of WFC purchasing the
senior debt position on one aircraft in order to include it in the
resecuritization of several other aircraft. The securitization has been
completed and the aircraft will be rolled into it once a lease is in place,
which is expected to occur prior to year end, resulting in a $50 million
reduction in the portfolio.
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):
Net Sales by Business Unit were as follows:
<TABLE>
<CAPTION>
Second Quarter Better/(Worse) First Half Better/(Worse)
------------------------- ----------------------- --------------------- --------------------
1996 1995 $ % 1996 1995 $ %
-------- -------- --------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $ 1,453 $ 1,329 $ 124 9 % $ 2,715 $ 2,525 $ 190 8 %
Europe 606 586 20 3 1,198 1,201 (3) (0)
Asia 113 94 19 20 217 156 61 39
Latin America 59 61 (2) (3) 117 128 (11) (9)
Other (2) (1) (1) 100 (5) (2) (3) 150
-------- -------- --------- -------- -------- ------- -------- --------
Total Appliance Business $ 2,229 $ 2,069 $ 160 8 % $ 4,242 $ 4,008 $ 234 6 %
======== ======== ========= ======= ======= ======= ======= ========
</TABLE>
Operating Profit by Business Unit was as follows:
<TABLE>
<CAPTION>
Second Quarter Better/(Worse) First Half Better/(Worse)
------------------------- ----------------------- --------------------- --------------------
1996 1995 $ % 1996 1995 $ %
-------- -------- --------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $ 158 $ 93 $ 65 70 % $ 278 $ 209 $ 69 33 %
Europe (23) 34 (57) (168) (25) 78 (103) (132)
Asia (15) (12) (3) 25 (26) (23) (3) (13)
Latin America (1) 5 (6) (120) 2 14 (12) (86)
Other (38) (33) (5) (15) (76) (68) (8) (12)
-------- -------- --------- -------- -------- ------- -------- --------
Total Appliance Business $ 81 $ 87 $ (6) (7) % $ 153 $ 210 $ (57) (27)%
======== ======== ========= ======= ======= ======= ======= ========
</TABLE>
For commentary regarding performance in North America and Europe, refer to
Results of Operations. Asia had significant shipment and sales growth as
compared to the prior year period due primarily to acquisitions in the prior
year. The planned quarterly and first half operating losses in the region were
comparable to those sustained in the prior periods as the Asian strategy shifts
into the execution phase from the start-up phase. During the first half of
1995, new operations in Shanghai (washers) and Beijing (refrigerators), China,
started to manufacture products. With those locations on-line, all six of
Whirlpool's Asian joint ventures, four in China and two in India, are in
production. Latin America includes Whirlpool Argentina and the South American
Sales Company (SASCO). Results in Argentina continued to be adversely affected
by a depressed appliance industry, driven by the sluggish Argentine economy and
a tight credit situation limiting customer and retailer financing resources.
SASCO results were down significantly due primarily to economic deterioration in
its key markets and the termination of certain distributors. Meaningful
recovery in industry activity and company performance in the Argentine or SASCO
markets is not expected to occur during 1996.
16
<PAGE>
PART II. OTHER INFORMATION
---------------------------
WHIRLPOOL CORPORATION AND SUBSIDIARIES
Quarter Ended June 30, 1996
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
a. The Annual Meeting of Stockholders was held on April 16, 1996 with Messrs.
William D. Marohn, Miles L. Marsh and Paul G. Stern each elected to a term
to expire in 1999 pursuant to a stockholder vote.
<TABLE>
<CAPTION>
BROKER
NOMINEE FOR AGAINST ABSTENTIONS NONVOTES
- --------- --- ------- ----------- --------
<S> <C> <C> <C> <C>
William D. Marohn 61,063,985 0 215,169 0
Miles L. Marsh 61,075,651 0 203,503 0
Paul G. Stern 60,734,185 0 544,968 0
</TABLE>
Messrs. Bonomo, Burnett, Cain, Gilmour, Langbo, Smith and Whitwam, and Ms.
Hempel and Stoney, each have terms of office as directors which continued after
the 1996 Annual Meeting.
b. The registrant's 1996 Omnibus Stock and Incentive Plan and an amendment to
the Nonemployee Director Stock Ownership Plan were approved by the holders
of a majority of the shares of the registrant's common stock present at the
Annual Meeting of Stockholders' held on April 16, 1996.
<TABLE>
<CAPTION>
BROKER
PROPOSAL FOR AGAINST ABSTENTIONS NONVOTES
-------- --- ------- ----------- --------
<S> <C> <C> <C> <C>
1996 Omnibus
Stock and
Incentive Plan 42,609,067 11,787,947 566,982 6,315,157
Nonemployee
Director Stock
Ownership Plan 56,331,551 3,991,348 956,253 0
</TABLE>
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a. The following are included herein:
(10) Material Contracts. The 1996 Omnibus Stock and Incentive Plan and the
Nonemployee Director Stock Ownership Plan are hereby incorporated by
reference to Exhibit A and Exhibit B, respectively, in the
registrant's Proxy Statement dated March 11, 1996.
(11) Computation of earnings per share
(27) Financial Data Schedule
(99) Computation of the ratios of earnings to fixed charges
b. The registrant filed the following Current Reports on Form 8-K for the
quarterly period ended June 30, 1996:
1. A Current Report on Form 8-K dated April 23, 1996 pursuant to Item 5,
"Other Events," to update a description of the registrant's capital
stock.
2. A Current Report on Form 8-K dated June 5, 1996 pursuant to Item 5,
"Other Events," concerning the registrant's announcement of the
effects of currency changes on its European operations, and that the
registrant expected its effective tax rate for the year to be
approximately 50%.
3. A Current Report on Form 8-K dated July 16, 1996 concerning the
registrant's announcement of its earnings for the second quarter and
first half of 1996.
18
<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)
By /s/ John P. Cunningham
-------------------------------
John P. Cunningham
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
August 2, 1996
19
<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
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
Primary
Average Shares Outstanding 74.2 73.8
Treasury Method (Average Market Price)
Stock Options 0.7 0.7
Restricted Stock (RSVP) 0.3 0.3
--------- ---------
Primary Average Shares Outstanding 75.2 74.8
========= =========
Primary Net Earnings $ 90.3 $ 127.3
========= =========
Earnings Per Share $ 1.20 $ 1.70
========= =========
Fully Diluted
Average Shares Outstanding 74.2 73.8
Treasury Method (Average Market Price
or End of Period, whichever is greater):
Stock Options 0.8 0.9
Restricted Stock (RSVP) 0.3 0.3
Assumed Conversion of Debt 2.2 2.2
--------- ---------
Fully Diluted Average Shares Outstanding 77.5 77.2
========= =========
Net Earnings $ 90.3 $ 127.3
Interest Expense, net of tax 2.2 2.1
--------- ---------
Fully Diluted Net Earnings $ 92.5 $ 129.4
========= =========
Earnings Per Share $ 1.19 $ 1.68
========= =========
</TABLE>
<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-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 141
<SECURITIES> 0
<RECEIVABLES> 2,285
<ALLOWANCES> 52
<INVENTORY> 1,074
<CURRENT-ASSETS> 3,797
<PP&E> 3,743
<DEPRECIATION> 1,988
<TOTAL-ASSETS> 7,989
<CURRENT-LIABILITIES> 3,964
<BONDS> 932
<COMMON> 81
0
0
<OTHER-SE> 1,830
<TOTAL-LIABILITY-AND-EQUITY> 7,989
<SALES> 4,242
<TOTAL-REVENUES> 4,331
<CGS> 3,300
<TOTAL-COSTS> 3,332
<OTHER-EXPENSES> 18
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 85
<INCOME-TAX> 39
<INCOME-CONTINUING> 90
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 99 - COMPUTATION OF THE
RATIOS OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(dollars in millions)
Six Months Ended
June 30, 1996
-------------------------------------------
Appliance Financial Whirlpool
Business Services Corporation
----------- ----------- ---------------
<S> <C> <C> <C>
Pretax earnings $ 67.3 $ 17.1 $ 84.4
Portion of rents representative
of the interest factor 8.1 0.4 8.5
Interest on indebtedness 78.1 37.5 115.6
Amortization of debt expense
and premium 0.3 0.1 0.4
WFC preferred stock dividend - 2.3 2.3
---------- ---------- ------------
Adjusted income $ 153.8 $ 57.4 $ 211.2
========== ========== ============
Fixed charges
- -------------
Portion of rents representative
of the interest factor $ 8.1 $ 0.4 $ 8.5
Interest on indebtedness 78.1 37.5 115.6
Amortization of debt expense
and premium 0.3 0.1 0.4
WFC preferred stock dividend - 2.3 2.3
---------- ---------- ------------
$ 86.5 $ 40.3 $ 126.8
========== ========== ============
Ratio of earnings to
fixed charges 1.78 1.42 1.67
========== ========== ============
Ratio of earnings to
fixed charges at
June 30, 1995 3.14 1.41 2.49
========== ========== ============
</TABLE>
