<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 September 30, 1997
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 September 30, 1997
--------------------- ----------------------------------------
Common stock, par value $1 per share 75,010,784
PAGE 1 OF 23
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
WHIRLPOOL CORPORATION
---------------------
Quarter Ended September 30, 1997
INDEX OF INFORMATION INCLUDED IN REPORT
<TABLE>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Statements
of Earnings 3
Consolidated Condensed Balance Sheets 4
Consolidated Condensed Statements
of Cash Flows 5
Notes to Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 12
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
WHIRLPOOL CORPORATION AND SUBSIDIARIES
FOR THE PERIOD ENDED SEPTEMBER 30
(millions of dollars except share and dividend data)
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------ ------------------
1997 1996 1997 1996
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $ 2,043 $ 2,155 $ 6,107 $ 6,397
EXPENSES:
Cost of products sold 1,593 1,679 4,717 4,979
Selling and administrative 398 383 1,152 1,154
Intangible amortization 8 9 25 27
Restructuring costs 308 30 308 30
-------- -------- -------- --------
2,307 2,101 6,202 6,190
-------- -------- -------- --------
OPERATING PROFIT (LOSS) (264) 54 (95) 207
OTHER INCOME (EXPENSE):
Interest and sundry income (expense) (7) (1) (10) (8)
Interest expense (37) (39) (110) (117)
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND OTHER ITEMS (308) 14 (215) 82
Income taxes (71) 18 (26) 51
-------- -------- -------- --------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE EQUITY EARNINGS AND MINORITY INTERESTS (237) (4) (189) 31
Equity earnings of affiliated companies 15 20 61 61
Minority interests 22 4 32 9
-------- -------- -------- --------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS (200) 20 (96) 101
Discontinued operations less applicable taxes (18) 1 (11) 10
-------- -------- -------- --------
NET EARNINGS (LOSS) $ (218) $ 21 $ (107) $ 111
======= ======= ======= =======
Per share of common stock:
Primary earnings (loss) from continuing operations $ (2.69) $ 0.27 $ (1.30) $ 1.35
Primary earnings (loss) from discontinued operations (0.24) 0.01 (0.14) 0.13
-------- -------- -------- --------
Primary earnings (loss) $ (2.93) $ 0.28 $ (1.44) $ 1.48
======= ======= ======= =======
Cash dividends $ 0.34 $ 0.34 $ 1.02 $ 1.02
======= ======= ======= =======
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(millions of dollars)
<TABLE>
<CAPTION>
September 30 December 31
1997 1997
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 90 $ 129
Trade receivables, less allowances
(1997: $63 ;1996: $45 ) 1,312 966
Financing receivables and leases,
less allowances
(1997: - ;1996: $12 ) - 1,400
Inventories 911 1,034
Other current assets 380 283
Net assets of discontinued operations 1,594 -
----------- ------------
TOTAL CURRENT ASSETS 4,287 3,812
Investments and other assets 1,026 830
Financing receivables and leases,
less allowances
(1997: - ;1996: $38 ) - 705
Intangibles, net 757 870
----------- ------------
1,783 2,405
Property, plant and equipment 3,683 3,839
Accumulated depreciation (2,119) (2,041)
----------- ------------
1,564 1,798
----------- ------------
TOTAL ASSETS $ 7,634 $ 8,015
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 2,055 $ 2,157
Accounts payable 810 983
Other current liabilities 1,128 882
----------- ------------
TOTAL CURRENT LIABILITIES 3,993 4,022
Long-term debt 900 955
Postemployment benefits 573 563
Other liabilities 326 367
----------- ------------
1,799 1,885
Minority interests 131 182
STOCKHOLDERS' EQUITY
Common stock 82 81
Paid-in capital 271 246
Retained earnings 1,735 1,918
Unearned restricted stock (6) (7)
Currency translation adjustment (134) (76)
Treasury stock - at cost (237) (236)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 1,711 1,926
----------- ------------
TOTAL LIABILITIES AND EQUITY $ 7,634 $ 8,015
=========== ============
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30
(millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CONTINUING OPERATIONS:
OPERATING ACTIVITIES
Net earnings / (loss) $ (107) $ 111
Equity in net earnings of affiliated
companies, less dividends received (45) (54)
Equity in net earnings in discontinued operations, net of dividend 11 (3)
Depreciation and amortization 248 249
Provision for doubtful accounts 7 2
Restructuring spending 290 (24)
Change in receivables (148) 11
Change in inventories 53 (14)
Change in payables (146) (105)
Other operating activities (45) 88
------- -------
CASH PROVIDED BY OPERATING ACTIVITIES 118 261
INVESTING ACTIVITIES
Net additions to properties (167) (209)
Acquisition of businesses, less cash acquired - (14)
Other investing activities 8 15
------- -------
CASH USED FOR INVESTING ACTIVITIES (159) (208)
FINANCING ACTIVITIES
Proceeds of short-term borrowings 7,840 5,031
Repayments of short-term borrowings (7,800) (5,147)
Proceeds of long-term debt 82 297
Repayments of long-term debt (117) (124)
Dividends (76) (76)
Purchase of treasury stock - (1)
Other financing activities 58 (24)
------- -------
CASH USED FOR FINANCING ACTIVITIES (13) (44)
------- -------
INCREASE / (DECREASE) IN CASH AND EQUIVALENTS (54) 9
DISCONTINUED OPERATIONS:
WHIRLPOOL FINANCIAL CORPORATION (NET) 15 14
------- -------
INCREASE / (DECREASE) IN CASH AND EQUIVALENTS (39) 23
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 129 149
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 90 $ 172
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
5
<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 nine months ended September 30, 1997 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,
1996.
NOTE B--BUSINESS ACQUISITIONS & DISPOSITIONS
In September 1997, the company reached a definitive agreement to purchase a
controlling interest in Brasmotor S.A. in Brazil. This transaction will involve
the purchase of preferred or non-voting shares and 33% of Brasmotor's voting
shares. The shares, combined with Whirlpool's existing 33% voting share
holdings in the company, extend Whirlpool's position to 66% of the voting shares
of the company which will result in the consolidation of the Brazilian
affiliates upon the completion of the acquisition in the fourth quarter of 1997.
The purchase price for the transaction is expected to be about $217 million.
In September 1997, the company reached a definitive agreement to sell the
majority of the assets of its subsidiary Whirlpool Financial Corporation
("WFC"). See Note C for further explanation.
In August 1997, the company sold its majority interest in its Argentine business
to the company's Brazilian affiliate, Multibras, in a share for share exchange
of Whirlpool Argentina shares for additional shares in Multibras, slightly
increasing the company's minority interest position in Multibras. No gain or
loss was recognized by the company on this transaction. Whirlpool Argentina's
annual sales and earnings are not significant to the company's consolidated
results of operations.
In November 1996, the company announced an agreement to sell the compressor
division and related facilities of its majority-owned Indian subsidiary,
contingent upon receiving all necessary government and regulatory approvals and
finalization of definitive
6
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE B--BUSINESS ACQUISITIONS & DISPOSITIONS (CONTINUED)
agreements. In July 1997, the transaction was finalized at a sale price near the
carrying amount of the related assets.
In October 1996, the company acquired the remaining minority interest in
Whirlpool Tatramat, a.s., a Slovakian washing machine manufacturer and appliance
distributor, for about $4 million.
In September 1996, the company acquired 100% of Gentech Trading (Pty.) Ltd., a
South African company, for about $27 million - $2 million of cash and $25
million of assumed debt. Renamed Whirlpool South Africa, the company
manufactures refrigerators and markets manufactured and imported appliances
under the Whirlpool and local KIC brand names. Gentech annual sales were about
$100 million for its fiscal year 1995.
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). As part of the merger plan, the
company purchased an additional interest in WWML for $12 million in April 1996,
resulting in a 56% interest in the combined entity, WOI.
Pro forma consolidated operating results reflecting acquisitions completed
through September 30, 1997 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--DISCONTINUED OPERATIONS
During the third quarter of 1997, the company decided to discontinue its
financing operations and adopted a plan to dispose of most of the assets of WFC
in a series of transactions over the next few months. The company expects to
record a net of tax gain relative to the sales of these assets of about $55
million.
In September 1997, the company reached a definitive agreement to sell the
inventory, consumer, and international financing businesses of WFC to
Transamerica Distribution Finance Corporation (TDF). The company expects to
close the sale with TDF following appropriate regulatory approval in the United
States and overseas.
In addition, the company expects to complete the sale of a majority of its
aerospace financing business in the fourth quarter. In connection with this
transaction, a $36 million pretax, $22 million after-tax charge was established
in the third quarter to provide a reserve for certain Whirlpool Financial
Corporation aerospace assets.
7
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C--DISCONTINUED OPERATIONS (CONTINUED)
Income taxes related to discontinued operations - Expense / (Income):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
(millions of dollars)
<S> <C> <C>
1997 $ (10) $ (3)
1996 $ 1 $ 7
</TABLE>
NOTE D--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------ -----------
(millions of dollars)
<S> <C> <C>
Finished products $ 903 $ 991
Raw materials and work in process 228 272
----- ------
Total FIFO cost 1,131 1,263
Less excess of FIFO cost
over LIFO cost 220 229
----- ------
$ 911 $1,034
===== ======
</TABLE>
8
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E--AFFILIATED COMPANIES
Equity in the net earnings (loss) of affiliated companies is as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1997 1996
---------------------
(millions of dollars)
<S> <C> <C>
Brazilian affiliates $ 57 $ 67
Mexican affiliate 3 (8)
Other 1 2
------ ------
$ 61 $ 61
====== ======
</TABLE>
The Brazilian affiliates have used the U.S. dollar for accounting purposes due
to the high levels of inflation in the Brazilian economy. Because the inflation
rate has declined significantly and if the current trend continues through the
end of the year, the Brazilian economy is expected to cease being considered
highly inflationary and the functional currency for some or all of the Brazilian
affiliates will change beginning in January 1998 to the local currency for
accounting purposes. The company has not determined the effect on future
financial statements.
9
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE F--RESTRUCTURING AND OTHER SPECIAL CHARGES
Restructuring costs consist of the following:
<TABLE>
<CAPTION>
September 30
1997 1996
---------------------
(millions of dollars)
<S> <C> <C>
Cash costs:
Employee severance and related payments $ 163 $ 9
Lease termination, facility disposition
and other costs 46 3
------- --------
Total cash costs 209 12
Noncash costs:
Loss on disposal of facilities and equipment 57 -
Other asset write-downs 42 18
------- --------
Total non-cash costs 99 18
------- --------
$ 308 $ 30
======= ========
</TABLE>
Third quarter 1997 restructuring costs of $308 million pretax, $221 million
after-tax include the elimination of about 4,700 positions in Asia, Europe and
North America primarily by increasing efficiencies in the European operations
through product consolidation and facility closings, while seeking strategic
alliances or other alternatives for two Chinese joint ventures. The
restructuring charge will result in annualized expected savings of $180 million
when fully implemented in the year 2000.
During the third quarter of 1997 the company also recognized special operating
charges of $53 million pretax, $37 million after-tax and minority interest,
principally due to the adjustment of the carrying value of receivables and
inventory, primarily in Europe and Asia.
1996 restructuring costs relate to streamlining a North American refrigerator
manufacturing operation in order to achieve greater efficiencies and lower
manufacturing costs for specific refrigerator models, transferring Asian
research and engineering operations from the regional center to the
manufacturing locations and relocating Whirlpool Asian headquarters to Hong
Kong. Pretax charges of $18 million and $12 million relate to the company's
North American and Asian operations and involve the termination of about 850
employees. About one-half of the cash costs were paid in 1996 with the remainder
paid in 1997. Total 1996 after-tax charges were $19 million or $.25 per share.
10
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE G--GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
(millions of dollars)
Major
Three Months North Other and Home
Ended September 30 America Europe Asia (Eliminations) Appliances
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales
1997 $ 1,362 $ 606 $ 104 $ (29) $ 2,043
1996 $ 1,389 $ 656 $ 116 $ (6) $ 2,155
Operating Profit
1997 $ 52 $ (175) $ (140) $ (1) $ (264)
1996 $ 89 $ (4) $ (30) $ (1) $ 54
Major
Nine Months North Other and Home
Ended September 30 America Europe Asia (Eliminations) Appliances
- ---------------------------------------------------------------------------------------
Sales
1997 $ 4,017 $1,784 $ 344 $ (38) $ 6,107
1996 $ 4,172 $1,895 $ 361 $ (31) $ 6,397
Operating Profit
1997 $ 245 $ (167) $ (172) $ (1) $ (95)
1996 $ 300 $ (32) $ (56) $ (5) $ 207
</TABLE>
NOTE H--EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share," which requires a new methodology for calculating
basic and diluted earnings per share. The company's primary earnings per share
as disclosed in the consolidated condensed statement of earnings are not
materially different from basic and diluted earnings per share calculated under
the new methodology. The new rules are required to be adopted in the fourth
quarter of 1997.
11
<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 nine
months ended September 30, 1997 and 1996. This section of Management's
Discussion highlights the main factors affecting operating results. The
accompanying financial statements include the company's investment in Whirlpool
Financial Corporation ("WFC") on a discontinued basis.
Net Sales
- ---------
Net sales decreased 5% for the third quarter and 5% for the first nine months
compared to the prior year periods. North American product shipments for the
quarter were up 1% with sales down 2% while product shipments for the first nine
months were down 3% and sales down 4% in an industry that was down approximately
3-5% for the first nine months. North American sales declines in the third
quarter were largely driven by the intense competitive pricing environment in
the industry. North American industry-wide shipments are currently expected to
be down about 2% for the full year over 1996. European product shipments were up
6% for the quarter in an industry that was up about 2%. European sales decreased
7% for the quarter and the first nine months; however, excluding the effect of
currency fluctuations, sales were up 8% for the quarter. Sales growth in Europe,
in local currency, reflects stabilization of the trend of declining price
realization that affected the industry for the last three years. For the
remainder of the year, European industry-wide shipments are currently expected
to be flat compared with last year.
Expenses
- --------
Gross margin percentage, excluding a special operating charge of $28 million
pretax, improved by 1.3 percentage points for the quarter and 1.0 percentage
points for the first nine months compared to 1996. North American gross margin
percentage improved principally due to manufacturing efficiencies, effective
cost control management and reduced material costs, partially offset by pricing
deterioration. Price realization combined with improved product mix, effective
cost control management and reduced material costs have improved European gross
margin percentage significantly compared to the prior year.
Appliance selling and administrative expenses, excluding a special operating
charge of $25 million pretax, decreased 3% for the quarter and 2% for the first
nine months, however, as a percent of net sales expenses increased by 0.5
percentage points for both the quarter and first nine months compared to 1996
due largely to the overall lower level of sales and higher administrative costs.
The company continues to look at selling and administrative cost reduction
opportunities. North American expenses as a percent of net sales were flat in
the third quarter and deteriorated slightly for the first nine months due to the
overall level of sales and additional advertising costs. European expenses as a
percent of net sales deteriorated slightly for the quarter due to the lower
level of overall sales. The percentage was slightly favorable for the first nine
months in spite of the lower level of overall sales, due to reduced
administrative and advertising spending, partially offset by increases in
freight costs.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Restructuring costs of $308 million pretax were incurred in the quarter to
better align the company's cost structure within the global home-appliance
marketplace, which is expected to result in annual savings of about $180 million
when fully implemented by the year 2000. In addition, the discontinued
operations results include a pretax charge of $36 million, after-tax charge of
$22 million to provide a reserve for certain WFC aerospace assets.
Other Income and Expense
- ------------------------
Consolidated interest and sundry expense was up for the quarter compared to the
prior year, primarily due to increases in Europe related to foreign currency
losses and miscellaneous items. These third quarter expenses were partially
offset by a one-time gain on an asset disposal in the second quarter of 1997 and
foreign currency losses incurred in 1996, leaving the first nine months
unfavorable compared to last year.
Appliance interest expense was down in the third quarter and first nine months
compared to the prior year, primarily due to favorable currency fluctuations and
partially offset by higher borrowing levels during 1997 (refer to "Cash Flow-
Operating Activities") and higher interest rates.
Income Taxes
- ------------
The effective income tax rate for continuing operations, excluding restructuring
and special operating charges, was 47% for the quarter compared to 66% in 1996
and 48% for the first nine months compared to 56% last year. The reduction from
the prior year's annual rate of 62% reflects the diminished impact of permanent
items due to higher projected annual earnings, excluding the above charges, in
1997 relative to 1996 as well as the ability to benefit from certain tax losses
in 1997.
Equity in Affiliated Companies
- ------------------------------
Equity earnings in affiliated companies were $15 million in the third quarter of
1997 compared to $20 million in 1996 and $61 million for the first nine months
of both 1997 and 1996.
The company's Brazilian affiliates generated equity earnings of $12 million for
the quarter and $57 million in the first nine months of 1997 compared to $20
million and $67 million in 1996. The decrease from 1996 record levels reflects
increasing competition and a significant and continuing slowdown in the previous
robust growth in the Brazilian appliance industry, partially offset by $14
million of additional Befiex benefits and other tax benefits for the quarter and
$24 million for the first nine months from a government export incentive program
that expires in mid 1998.
In December 1996, a favorable decision was obtained by Multibras S.A.
Eletrodomesticos (Multibras) and Empresa Brasileira de Compressores S.A.
(Embraco) with respect to additional export incentives in connection with a
Brazilian government export incentive program. In April 1997, these affiliates
submitted tax-credit claims for about $440 million (U.S.) relating to the
favorable decision for exports from July 1988 through December 1996. The
Brazilian court must render a final decision on the amount, timing and the
payment method of any final award. The
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
company has not recognized any income relating to the claims involving sales
prior to 1997 because the timing and payment amount of such claims are
uncertain. On an equity basis, the company owns about 37% of Multibras and 50%
of Embraco.
The company's Mexican equity results improved $2 million over prior year's
break-even third quarter and are $11 million better for the first nine months
compared to the $8 million of equity loss generated in 1996. This performance
resulted from higher shipment volumes as the appliance industry was up nearly
30% and lower financing costs triggered by a refinancing at the end of the
second quarter in 1996.
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.
Net Earnings
- ------------
Third quarter net earnings, excluding restructuring, operating charges and a
reserve provided for certain WFC assets, were $62 million or $.82 per share
compared to net earnings of $40 million or $.53 per share in 1996, excluding
restructuring. Net earnings, excluding restructuring, operating charges and a
reserve provided for certain WFC assets, for the first nine months were $173
million or $2.30 per share compared to net earnings of $130 million or $1.73 per
share in 1996, excluding restructuring.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
CASH FLOWS
The statements of cash flows reflect the changes in cash and equivalents for the
nine months ended September 30, 1997 and 1996 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 for continuing operations in the first
nine months of 1997 was $118 million compared to $261 million in 1996. The
current year cash generation compared to the prior year reflects higher working
capital needs.
Investing Activities
- --------------------
The principal recurring investing activities are property additions and
investments. Net property additions for continuing operations for the first nine
months were $167 million in 1997 compared to $209 million in 1996. These
expenditures are primarily for equipment and tooling related to product
improvements, more efficient production methods and replacement for normal wear
and tear.
Refer to Note B to the accompanying consolidated financial statements for a
discussion of business dispositions and acquisitions.
Financing Activities
- --------------------
Dividends to shareholders totaled $76 million for the first nine months of 1997
and 1996.
The company's borrowings for continuing operations increased by $5 million
during the first nine months of 1997, excluding the effect of currency
fluctuations, primarily to fund seasonal working capital needs and property
additions. The 1997 borrowing activities for continuing operations included the
first quarter repayment of $113 million of outstanding subordinated zero-coupon
convertible notes, financed through the issuance of additional commercial paper.
15
<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
September 30, 1997 balance sheet. The company's total assets are $7.6 billion
and stockholders' equity is $1.7 billion.
The overall debt to invested capital ratio at September 30, 1997 increased
slightly compared to December 31, 1996 due primarily to the restructuring and
special operating charge write-off and higher borrowing levels to support
seasonal working capital requirements, capital spending and dividend payments.
The company's debt continues to be rated investment grade by Moody's Investors
Service Inc., Standard and Poor's and Duff & Phelps.
Various European currency swaps and forward contracts serve as a hedge of net
foreign currency cash flows and also hedge a portion of the company's European
net assets. 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 if they relate to the European net hedge or otherwise in
other income (expense).
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.
In the fourth quarter of 1997, the company plans to purchase a majority interest
in Brasmotor, one of the Brazilian affiliates. This purchase will be funded with
the proceeds of previously sold assets.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
BUSINESS UNIT NET SALES AND OPERATING PROFIT
The following data is presented as supplemental information (in millions):
Net Sales by Business Unit were as follows:
<TABLE>
<CAPTION>
Third Quarter Better/(Worse) Nine Months Better/(Worse)
---------------- ---------------- ---------------- ----------------
1997 1996 $ % 1997 1996 $ %
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $1,328 $1,360 $ (32) (2)% $3,923 $4,075 $ (152) (4)%
Europe 588 633 (45) (7) 1,713 1,831 (118) (6)
Asia 88 101 (13) (13) 312 318 (6) (2)
Latin America 36 63 (27) (43) 159 180 (21) (12)
Other 3 (2) 5 250 0 (7) 7 100
------ ------ ------ ------ ------ ------ ------ ------
Total $2,043 $2,155 $ (112) (5)% $6,107 $6,397 $ (290) (5)%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Operating Profit by Business Unit was as follows:
<TABLE>
<CAPTION>
Third Quarter Better/(Worse) Nine Months Better/(Worse)
---------------- ---------------- ---------------- ----------------
1997 1996 $ % 1997 1996 $ %
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $ 136 $ 138 $ (2) (1)% $ 408 $ 416 $ (8) (2)%
Europe 21 (2) 23 1,150 31 (27) 58 215
Asia (19) (19) - - (54) (45) (9) (20)
Latin America - 2 (2) (100) 4 4 - -
Restructuring and
Operating Charge (361) (30) (331) (1,103) (361) (30) (331) (1,103)
Other (41) (35) (6) (17) (123) (111) (12) (11)
------ ------ ------ ------ ------ ------ ------ ------
Total $ (264) $ 54 $ (318) (589)% $ (95) $ 207 $ (302) (146)%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
For commentary regarding performance in North America and Europe, refer to
"Results of Operations." Latin American sales and operating profit do not
include the activities of Brazilian affiliates, which are included in equity in
affiliated companies and discussed in "Results from Operations." Other consists
of corporate expenses and eliminations.
Asia had year-over-year decreases for both the third quarter and first nine
months in unit volume and sales as compared to the prior year. The third quarter
operating loss in the region was flat with the prior period as the Indian
refrigerator industry experienced a significant slowdown which was offset by
cost structure initiatives for the quarter. The company has decided to
restructure two of the China businesses and to significantly reduce costs in the
Asia and China headquarters. These actions are proceeding as planned and are
currently expected to produce improved operating results for the Asian region in
1998.
Latin America sales decreased significantly from 1996 for the quarter primarily
due to the recognition of one month of Whirlpool Argentina results in the third
quarter of 1997 versus three months in 1996 due to the exchange of Whirlpool
Argentina for increased ownership in Multibras. Refer to Note B to the
accompanying consolidated financial statements for a discussion of business
dispositions and acquisitions.
17
<PAGE>
PART II. OTHER INFORMATION
--------------------------
WHIRLPOOL CORPORATION AND SUBSIDIARIES
Quarter Ended September 30, 1997
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a. The following are included herein:
(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 September 30, 1997:
A Current Report on Form 8-K dated July 10, 1997 pursuant to Item 5, "Other
Events," to report Eileen Kamerick being named corporate vice president and
treasurer for the company. Also, on July 15, 1997 the registrant reported
second quarter and first half earnings for 1997.
A Current Report on Form 8-K dated July 31, 1997 pursuant to Item 5, "Other
Events," to report that the registrant was exploring a full array of
strategic business options involving Whirlpool Financial Corporation, its
wholly owned financial services subsidiary.
A Current Report on Form 8-K dated September 18, 1997 pursuant to Item 5,
"Other Events," to report that the registrant was taking several steps to
extend its global leadership position and to change its worldwide business
structure. These steps are as follows:
. Acquiring the majority interest in Brasmotor S.A., the company's Latin
American affiliate, for $217 million;
. Electing H. Miguel Etchenique, chairman and CEO of Brasmotor S.A., to
Whirlpool's Board of Directors;
. Selling the inventory and consumer financial business and certain other
assets of Whirlpool Financial Corporation;
18
<PAGE>
. Eliminating about 4,700 positions in Asia, Europe and North America,
while seeking strategic alliances or other alternatives for two Chinese
joint ventures.
A Current Report on Form 8-K dated September 22, 1997 pursuant to Item 5,
"Other Events," to report the resignation of Robert G. Thompson as
corporate vice president and controller. Mark Brown was named as successor
to Mr. Thompson. Also, on September 24, 1997, the registrant announced
that Michael D. Thieneman will become executive vice president of the
company's North American Region. Mr. Thieneman succeeds Ralph F. Hake,
senior executive vice president of operations, who was named to his current
position in February.
A Current Report on Form 8-K dated October 15, 1997 pursuant to Item 5,
"Other Events," to report third quarter financial results and the
completion of the sale of Whirlpool Financial Corporation's inventory
finance business, and certain other assets, to Transamerica Distribution
Finance Corporation.
19
<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 John P. Cunningham
------------------------
John P. Cunningham
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
November 3, 1997
20
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(millions of dollars except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------------------
1997 1996
-------- --------
<S> <C> <C>
Primary
Average Shares Outstanding 74.5 74.2
Treasury Method (Average Market Price)
Stock Options - 0.6
Restricted Stock (RSVP) - 0.3
------- ------
Primary Average Shares Outstanding 74.5 75.1
======= ======
Primary Net Earnings $(107.3) $111.2
======= ======
Earnings Per Share** $ (1.44) $ 1.48
======= ======
Fully Diluted
Average Shares Outstanding 74.5 74.2
Treasury Method (Average Market Price
or End of Period, whichever is greater):
Stock Options - 0.7
Restricted Stock (RSVP) - 0.3
Assumed Conversion of Debt - 2.2
------- ------
Fully Diluted Average Shares Outstanding 74.5 77.4
======= ======
Net Earnings $(107.3) $111.2
Interest Expense, net of tax - 3.4
------- ------
Fully Diluted Net Earnings $(107.3) $114.6
======= ======
Earnings Per Share $ (1.44) $ 1.48
======= ======
</TABLE>
**The registrants Form 8-K filing dated October 15, 1997 reporting third quarter
earnings contains a computation of ($1.42) earnings per share. The correct
figure is ($1.44).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Third Quarter 10Q for Whirlpool Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 90
<SECURITIES> 0
<RECEIVABLES> 1312
<ALLOWANCES> 63
<INVENTORY> 911
<CURRENT-ASSETS> 4287
<PP&E> 3683
<DEPRECIATION> 2119
<TOTAL-ASSETS> 7634
<CURRENT-LIABILITIES> 3993
<BONDS> 900
0
0
<COMMON> 82
<OTHER-SE> 1629
<TOTAL-LIABILITY-AND-EQUITY> 7634
<SALES> 6107
<TOTAL-REVENUES> 6107
<CGS> 4717
<TOTAL-COSTS> 5869
<OTHER-EXPENSES> 333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (110)
<INCOME-PRETAX> (215)
<INCOME-TAX> (26)
<INCOME-CONTINUING> (96)
<DISCONTINUED> (11)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107)
<EPS-PRIMARY> (1.44)
<EPS-DILUTED> (1.44)
</TABLE>
<PAGE>
EXHIBIT 99
RATIOS OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(dollars in millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
------------------
<S> <C>
Pretax earnings $(214.6)
Portion of rents representative
of the interest factor 13.0
Interest on indebtedness 109.9
Amortization of debt expense
and premium 0.5
-------
Adjusted income $ (91.2)
=======
Fixed charges
Portion of rents representative
of the interest factor $ 13.0
Interest on indebtedness 109.9
Amortization of debt expense
and premium 0.5
-------
$ 123.4
=======
Ratio of earnings to
fixed charges (0.74)
=======
Ratio of earnings to
fixed charges at
September 30, 1996 1.63
=======
</TABLE>
