<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, 1997
Commission file number 1-3932
WHIRLPOOL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
Class of common stock Shares outstanding at June 30, 1997
--------------------- -----------------------------------
Common stock, par value $1 per share 74,552,169
</TABLE>
PAGE 1 OF 23
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
WHIRLPOOL CORPORATION
---------------------
Quarter Ended June 30, 1997
INDEX OF INFORMATION INCLUDED IN REPORT
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<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
- ------------------------------
<S> <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 & 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
WHIRLPOOL CORPORATION AND SUBSIDIARIES
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)
----------------------- ---------------------- ----------------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Net sales $ 2,074 $ 2,229 $ 2,074 $ 2,229 $ - $ -
Financial services 43 43 - - 62 55
--------- --------- --------- --------- ------------ ----------
2,117 2,272 2,074 2,229 62 55
EXPENSES
Cost of products sold 1,588 1,737 1,588 1,737 - -
Selling and administrative 393 418 381 402 31 28
Financial services interest 22 16 - - 23 19
Intangible amortization 9 9 9 9 - -
--------- --------- --------- --------- ------------ ----------
2,012 2,180 1,978 2,148 54 47
--------- --------- --------- --------- ------------ ----------
OPERATING PROFIT 105 92 96 81 8 8
OTHER INCOME (EXPENSE)
Interest and sundry 4 (4) 2 (5) 1 1
Interest expense (40) (44) (38) (41) - -
--------- --------- --------- --------- ------------ ----------
EARNINGS BEFORE TAXES
AND OTHER ITEMS 69 44 60 35 9 9
Income taxes 32 21 29 18 3 3
--------- --------- --------- --------- ------------ ----------
EARNINGS BEFORE EQUITY EARNINGS
AND MINORITY INTERESTS 37 23 31 17 6 6
Equity in WFC - - 3 5 - -
Equity in affiliated companies 24 27 24 27 - -
Minority interests 4 2 7 3 (3) (1)
--------- --------- --------- --------- ------------ ----------
NET EARNINGS $ 65 $ 52 $ 65 $ 52 $ 3 $ 5
========= ========= ========= ========= ============ ==========
Per share of Common Stock:
Primary earnings $ 0.86 $ 0.70
========= =========
Cash dividends $ 0.34 $ 0.34
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
3
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
WHIRLPOOL CORPORATION AND SUBSIDIARIES
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)
--------------------- ------------------------- --------------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Net sales $ 4,064 $ 4,242 $ 4,064 $ 4,242 $ - $ -
Financial services 91 89 - - 124 109
---------- ---------- ---------- ---------- ------------ ----------
4,155 4,331 4,064 4,242 124 109
EXPENSES
Cost of products sold 3,124 3,300 3,124 3,300 - -
Selling and administrative 785 811 754 771 64 60
Financial services interest 42 32 - - 45 38
Intangible amortization 17 18 17 18 - -
---------- ---------- ---------- ---------- ------------ ----------
3,968 4,161 3,895 4,089 109 98
---------- ---------- ---------- ---------- ------------ ----------
OPERATING PROFIT 187 170 169 153 15 11
OTHER INCOME (EXPENSE)
Interest and sundry - (1) (3) (7) 3 6
Interest expense (76) (84) (73) (78) - -
---------- ---------- ---------- ---------- ------------ ----------
EARNINGS BEFORE TAXES
AND OTHER ITEMS 111 85 93 68 18 17
Income taxes 52 39 45 33 7 6
---------- ---------- ---------- ---------- ------------ ----------
EARNINGS BEFORE EQUITY EARNINGS
AND MINORITY INTERESTS 59 46 48 35 11 11
Equity in WFC - - 7 9 - -
Equity in affiliated companies 46 41 46 41 - -
Minority interests 6 3 10 5 (4) (2)
---------- ---------- ---------- ---------- ------------ ----------
NET EARNINGS $ 111 $ 90 $ 111 $ 90 $ 7 $ 9
========== ========== ========== ========== ============ ==========
Per share of Common Stock:
Primary earnings $ 1.48 $ 1.20
========== ==========
Cash dividends $ 0.68 $ 0.68
========== ==========
See notes to consolidated condensed financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(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
1997 1996 1997 1996 1997 1996
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 172 $ 129 $ 123 $ 102 $ 49 $ 27
Trade receivables, less allowances
(1997: $46; 1996: $45) 1,104 966 1,104 966 - -
Financing receivables and leases,
less allowances
(1997: $12; 1996: $12) 1,302 1,400 - - 1,302 1,400
Inventories 1,097 1,034 1,097 1,034 - -
Other current assets 275 283 277 291 10 6
------ ------ ------ ------ ------ ------
TOTAL CURRENT ASSETS 3,950 3,812 2,601 2,393 1,361 1,433
Investments and other assets 822 830 1,110 1,113 - -
Financing receivables and leases,
less allowances
(1997: $39; 1996: $38) 710 705 - - 710 705
Intangibles, net 795 870 795 870 - -
------ ------ ------ ------ ------ ------
2,327 2,405 1,905 1,983 710 705
Property, plant and equipment 3,757 3,839 3,736 3,820 21 19
Accumulated depreciation (2,075) (2,041) (2,063) (2,030) (12) (11)
------ ------ ------ ------ ------ ------
1,682 1,798 1,673 1,790 9 8
------ ------ ------ ------ ------ ------
TOTAL ASSETS $7,959 $8,015 $6,179 $6,166 $2,080 $2,146
====== ====== ====== ====== ====== ======
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(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
1997 1996 1997 1996 1997 1996
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $2,299 $2,157 $ 903 $ 704 $1,396 $1,453
Accounts payable 863 983 779 886 96 111
Other current liabilities 853 882 844 876 9 6
------ ------ ------ ------ ------ ------
TOTAL CURRENT LIABILITIES 4,015 4,022 2,526 2,466 1,501 1,570
Long-term debt 900 955 832 887 68 68
Postemployment benefits 567 563 560 557 7 6
Other liabilities 356 367 240 248 116 119
------ ------ ------ ------ ------ ------
1,823 1,885 1,632 1,692 191 193
Minority interests 174 182 74 82 110 110
STOCKHOLDERS' EQUITY
Common stock 81 81 81 81 8 8
Paid-in capital 253 246 253 246 26 26
Retained earnings 1,978 1,918 1,978 1,918 249 242
Unearned restricted stock (6) (7) (6) (7) - -
Currency translation adjustments (122) (76) (122) (76) (5) (3)
Treasury stock - at cost (237) (236) (237) (236) - -
------ ------ ------ ------ ------ ------
TOTAL STOCKHOLDERS' EQUITY 1,947 1,926 1,947 1,926 278 273
------ ------ ------ ------ ------ ------
TOTAL LIABILITIES AND EQUITY $7,959 $8,015 $6,179 $6,166 $2,080 $2,146
====== ====== ====== ====== ====== ======
See notes to consolidated condensed financial statements.
</TABLE>
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)
-------------------- ------------------ -------------------
1997 1996 1997 1996 1997 1996
-------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 111 $ 90 $ 111 $ 90 $ 7 $ 9
Equity in net earnings of affiliated
companies, less dividends received (38) (38) (38) (38) - -
Equity in net earnings of WFC, net of dividend - - (7) (2) - -
Depreciation and amortization 181 182 169 168 12 14
Provision for doubtful accounts 22 32 3 7 19 25
Restructuring spending (11) (32) (11) (32) - -
Change in receivables (178) (145) (178) (145) - -
Change in inventories (88) (60) (88) (60) - -
Change in payables (71) (50) (70) (50) (1) -
Other operating activities 8 36 9 29 (1) 7
-------- ------- ------- ------- -------- -------
CASH PROVIDED BY / (USED FOR) OPERATING ACTIVITIES (64) 15 (100) (33) 36 55
INVESTING ACTIVITIES
Net additions to properties (105) (136) (105) (136) - -
Financing receivables originated and leasing
assets purchased (2,042) (1,907) - - (2,042) (1,907)
Principal payments received on financing
receivables and leases 2,100 1,931 - - 2,100 1,931
Acquisition of businesses, less cash acquired - (12) - (12) - -
Other investing activities 3 (32) 13 15 (10) (47)
-------- ------- ------- ------- -------- -------
CASH PROVIDED BY / (USED FOR) INVESTING ACTIVITIES (44) (156) (92) (133) 48 (23)
FINANCING ACTIVITIES
Proceeds of short-term borrowings 21,053 8,045 6,185 3,235 14,868 4,810
Repayments of short-term borrowings (20,773) (7,797) (5,873) (2,998) (14,900) (4,799)
Proceeds of long-term debt 62 37 62 37 - -
Repayments of long-term debt (140) (66) (116) (43) (24) (23)
Repayments of non-recourse debt (6) (9) - - (6) (9)
Dividends (51) (51) (51) (51) - (7)
Other financing activities 6 (26) 6 (23) - (3)
-------- ------- ------- ------- -------- -------
CASH PROVIDED BY / (USED FOR) FINANCING ACTIVITIES 151 133 213 157 (62) (31)
-------- ------- ------- ------- -------- -------
INCREASE / (DECREASE) IN CASH AND EQUIVALENTS 43 (8) 21 (9) 22 1
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 129 149 102 125 27 24
-------- ------- ------- ------- -------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 172 $ 141 $ 123 $ 116 $ 49 $ 25
======== ======= ======= ======= ======== =======
See notes to consolidated condensed financial statements.
</TABLE>
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, 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 June 1997, the company agreed to exchange its majority interest in its
Argentine business to the company's Brazilian affiliate, Multibras, in a share
for share exchange of Whirlpool Argentina for additional shares in Multibras,
slightly increasing the company's minority interest position in Multibras.
Whirlpool Argentina annual sales were $147 million for its fiscal year 1996.
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 agreements. In July 1997, the transaction was
finalized at a sale price near the carrying amount of the related assets and
involves a long-term supplier relationship with the purchaser, initially
involving annual compressor purchases of about $25 million to $30 million.
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
8
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE B--BUSINESS ACQUISITIONS & DISPOSITIONS (CONTINUED)
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 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
1997 1996
------- -----------
(millions of dollars)
<S> <C> <C>
Finished products $ 1,075 $ 991
Raw materials and work in process 246 272
------- -------
Total FIFO cost 1,321 1,263
Less excess of FIFO cost
over LIFO cost 224 229
------- -------
$ 1,097 $ 1,034
======= =======
</TABLE>
NOTE D--AFFILIATED COMPANIES
Equity in the net earnings (loss) of affiliated companies is as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30
1997 1996
---------------------
(millions of dollars)
<S> <C> <C>
Brazilian affiliates $ 45 $ 48
Mexican affiliate - (8)
Other 1 1
----- -----
$ 46 $ 41
===== =====
</TABLE>
9
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E--GEOGRAPHIC SEGMENTS
(millions of dollars)
Major
Three Months North Other and Home
Ended June 30 America Europe Asia (Eliminations) Appliances
- --------------------------------------------------------------------------------
Sales
1997 $ 1,366 $ 596 $ 119 $ (7) $ 2,074
1996 $ 1,490 $ 626 $ 128 $ (15) $ 2,229
Operating Profit (Loss)
1997 $ 107 $ 6 $ (18) $ 1 $ 96
1996 $ 125 $ (24) $ (14) $ (6) $ 81
Major
Six Months North Other and Home
Ended June 30 America Europe Asia (Eliminations) Appliances
- --------------------------------------------------------------------------------
Sales
1997 $ 2,655 $ 1,178 $ 240 $ (9) $ 4,064
1996 $ 2,783 $ 1,239 $ 245 $ (25) $ 4,242
Operating Profit (Loss)
1997 $ 193 $ 8 $ (32) $ - $ 169
1996 $ 211 $ (28) $ (26) $ (4) $ 153
NOTE F--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.
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, 1997 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 decreased 7% for second quarter and 4% for the first half compared to
the prior year periods. North American product shipments were down 9% with
sales down 8% while product shipments for the first half were down 5% and sales
down 4%. North American sales declines in the second quarter are due to weak
air conditioner sales which were experienced throughout the entire industry.
Absent the weak quarter for air conditioner sales, North American shipments and
sales were in line with last year. North American industry-wide shipments are
currently expected to be down about 3% for the full year over 1996. European
product shipments were up 1% in an industry that was down about 2% for both the
quarter and first half. European sales decreased 7% for the second quarter and
6% for the first half; however, excluding the effect of currency fluctuations,
sales were up 3% for the second quarter and first half. 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 to down slightly compared with last year. WFC financial services
revenues increased 13% for the second quarter and 14% for the first half
compared to the prior year primarily due to increases in outstanding financing
receivables.
Expenses
- --------
Gross margin percentage on products sold to net sales improved by 1.3 percentage
points for the second quarter and 0.9 percentage points for the first half
compared to 1996. North American gross margin improved principally due to
improved product mix, 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 has improved European gross
margin compared to the prior year.
Appliance selling and administrative expenses decreased 5% for the quarter and
2% for the first half, however, as a percent of net sales, expenses increased by
0.4 percentage points for both the second quarter and first half compared to
1996 due largely to the overall lower level of sales and freight and warehousing
costs. The company continues to look at selling and administrative cost
reduction opportunities. North American expenses as a percent of net sales
deteriorated largely due to the overall level of sales and additional
promotional and advertising costs, partially offset by
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
competitive cost structure initiatives for both the second quarter and first
half. European expenses as a percent of net sales improved slightly, in spite of
the lower level of overall sales, due to reduced administrative and advertising
spending, partially offset by increases in freight and warehousing costs for the
second quarter and first half. WFC selling and administrative expenses as a
percent of financial services revenue were down for the quarter and the first
half due to higher revenues in 1997 and higher losses in 1996 on certain
consumer financing receivables.
Other Income and Expense
- ------------------------
Consolidated interest and sundry expense for the quarter was better compared to
the prior year, primarily due to a one-time gain on an asset disposal and
foreign currency losses incurred in 1996. These second quarter gains offset a
gain on the sale of an investment by WFC in the first quarter of 1996 leaving
the first half flat with last year.
Appliance interest expense was down in the second quarter and first half
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 consolidated effective income tax rate was 48% for the 1996 and 1997 second
quarter and 48% for the first half compared to 46% 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 in 1997 relative to 1996 as well
as the ability to benefit certain tax benefit losses in 1997.
Equity in Affiliated Companies
- ------------------------------
Equity earnings in affiliated companies were $24 million in the second quarter
of 1997 compared to $27 million in 1996 and $46 million for the first half of
1997 compared to $41 million in the prior year period.
The company's Brazilian affiliates generated equity earnings of $22 million for
the quarter and $45 million in the first half of 1997 compared to $31 million
and $48 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 $7
million of additional benefits for the quarter and $10 million for the first
half 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 company
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
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 $5 million over prior year's $4
million second quarter equity loss and broke even for the first half compared to
$8 million of equity loss generated for the first half in 1996. This performance
resulted from higher shipment volumes as the appliance industry was up nearly
29% 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
- ------------
Second quarter net earnings were $65 million or $.86 per share compared to net
earnings of $52 million or $.70 per share in 1996. First half net earnings were
$111 million or $1.48 per share compared to net earnings of $90 million or $1.20
per share in 1996.
13
<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
six months ended June 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 used by operating activities in the first half of 1997 was $64 million
compared to $15 million generated in 1996. 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 usage
compared to the prior year reflects higher working capital needs, partially
offset by higher earnings.
Investing Activities
- --------------------
The principal recurring investing activities are property additions and
investments in and collection of financing receivables and leases. Net property
additions for the first half were $105 million in 1997 compared to $136 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. Investment in the financial services business resulted in
a net $58 million source of cash in 1997 compared to a net $24 million source of
cash in 1996 reflecting the reduction of WFC's inventory financing portfolio
and the continuing liquidation of WFC's discontinued portfolios.
Refer to Note B to the accompanying consolidated financial statements for a
discussion of business dispositions and acquisitions.
Financing Activities
- --------------------
Dividends to shareholders totaled $51 million for the first half of 1997 and
1996.
The company's borrowings increased by $197 million during the first half of
1997, excluding the effect of currency fluctuations, primarily to fund seasonal
working capital needs and property additions. The 1997 borrowing activities
included the first quarter repayment of $113 million of outstanding subordinated
zero-coupon convertible notes, financed through the issuance of additional
commercial paper.
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, 1997 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, 1997 was flat compared to
December 31, 1996. The appliance business debt to invested capital ratio net of
cash ("debt ratio") increased from 43% to 44% 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
decreased from 80% to 79% due primarily to reduced borrowings caused by quick
turnover in the inventory financing portfolio. 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).
WFC's financing portfolio by business segment is as follows (in millions):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Inventory $1,121 56% $1,215 58%
Consumer 501 25 474 23
Aerospace 349 17 361 17
Other 41 2 55 2
------ --- ------ ---
$2,012 100% $2,105 100%
====== === ====== ===
</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 financial services industry is very competitive and various leasing
companies, financial institutions and finance companies operate in the same
markets as WFC.
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)
---------------- --------------- ---------------- ---------------
1997 1996 $ % 1997 1996 $ %
------ ------ ----- ---- ------ ------ ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $1,335 $1,453 $(118) (8)% $2,595 $2,715 $(120) (4)%
Europe 565 606 (41) (7) 1,125 1,198 (73) (6)
Asia 111 113 (2) (2) 224 217 7 3
Latin America 63 59 4 7 123 117 6 5
Other - (2) 2 (100) (3) (5) 2 40
------ ------ ------ ---- ------ ------ ----- ---
Total Appliance Business $2,074 $2,229 $(155) (7)% $4,064 $4,242 $(178) (4)%
====== ====== ===== ==== ====== ====== ===== ===
</TABLE>
Operating Profit By Business Unit was as follows:
<TABLE>
<CAPTION>
Second Quarter Better/(Worse) First Half Better/(Worse)
-------------- -------------- ------------ --------------
1997 1996 $ % 1997 1996 $ %
---- ---- ---- ---- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $144 $158 $(14) (9)% $272 $278 $(6) (2)%
Europe 6 (23) 29 126 10 (25) 35 140
Asia (20) (15) (5) (33) (35) (26) (9) (35)
Latin America 3 (1) 4 400 4 2 2 100
Other (37) (38) 1 3 (82) (76) (6) (8)
---- ---- ---- --- ----- ---- --- ---
Total Appliance Business $ 96 $ 81 $ 15 19 % $169 $153 $16 10 %
==== ==== ==== === ===== ==== === ===
</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 the second quarter in unit volume and
sales as compared to the prior year and was flat with prior year levels for the
first half. The second quarter operating loss in the region was higher than
that sustained in the prior period as the region increased investment in sales
and marketing infrastructure, primarily in China, and the Indian refrigerator
industry experienced a significant slowdown. The company is currently
evaluating its business strategy to determine the appropriate actions necessary
to improve competitiveness in the region.
Latin America sales increased moderately from 1996 for the second quarter and
first half due to improving economic and industry environments. The Latin
American appliance industry outside of Brazil is expected to increase 10% year
over year versus a decline of about the same magnitude last year. The increase
in operating profit in Latin America for the quarter compared to last year is
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
principally due to reduced selling and administrative costs incurred as the
company transitions to different distribution arrangements in certain markets.
The company is exploring a full array of strategic business options involving
WFC. The analysis includes possible alliances, partnerships and other
alternatives and is part of the company's ongoing assessment of how its
worldwide businesses can best create value. The company expects to continue a
relationship with WFC regardless of the study's outcome.
17
<PAGE>
PART II. OTHER INFORMATION
WHIRLPOOL CORPORATION AND SUBSIDIARIES
Quarter Ended June 30, 1997
Item 4. Submission of Matters to a Vote of Security-Holders.
- -------------------------------------------------------------
a. The Annual Meeting of Stockholders was held on April 15, 1997 with Messrs.
Gary DiCamillo, Arnold G. Langbo, Philip L. Smith, and Ms. Kathleen J.
Hempel each elected to a term to expire in 2000 pursuant to a stockholder
vote.
<TABLE>
<CAPTION>
Nominee For Against Abstentions
------- --- ------- -----------
<S> <C> <C> <C>
Gary DiCamillo 64,717,551 0 887,517
Kathleen J. Hempel 64,724,465 0 880,603
Arnold G. Langbo 64,725,762 0 879,306
Philip L. Smith 64,725,470 0 879,598
</TABLE>
Messrs. Burnett, Cain, Gilmour, Marohn, Marsh, Stern, and Whitwam, and Ms.
Stoney each have terms of office as directors that continued after the 1997
Annual Meeting.
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 June 30, 1997:
A Current Report on Form 8-K dated April 1, 1997 pursuant to Item 5, "Other
Events," to report the resignation of Bradley J. Bell from his position as
Vice President and Treasurer effective April 30, 1997.
18
<PAGE>
A Current Report on Form 8-K dated April 18, 1997 pursuant to Item 5, "Other
Events," to report the registrant's first quarter 1997 earnings.
A Current Report on Form 8-K dated April 18, 1997 pursuant to Item 5, "Other
Events," to report tax credits amounting to approximately $440 million U.S.
claimed by the registrant's Brazilian affiliates under a Brazilian government
export program. A Brazilian court must render a final decision on the amount,
timing and payment method of any final award. The registrant, which owns
minority interests in the Brazilian companies, Multibras S.A. Eletrodomesticos
and Empresa Brasileira de Compressores S.A., has not recognized any income
relating to the claims.
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)
August 13, 1997
20
<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
----------------
1997 1996
------ -----
<S> <C> <C>
Primary
Average Shares Outstanding 74.4 74.2
Treasury Method (Average Market Price)
Stock Options 0.5 0.7
Restricted Stock (RSVP) 0.3 0.3
------ -----
Primary Average Shares Outstanding 75.2 75.2
====== =====
Primary Net Earnings $111.0 $90.3
====== =====
Earnings Per Share $ 1.48 $1.20
====== =====
Fully Diluted
Average Shares Outstanding 74.4 74.2
Treasury Method (Average Market Price
or End of Period, whichever is greater):
Stock Options 0.9 0.8
Restricted Stock (RSVP) 0.3 0.3
Assumed Conversion of Debt - 2.2
------ -----
Fully Diluted Average Shares Outstanding 75.6 77.5
====== =====
Net Earnings $111.0 $90.3
Interest Expense, net of tax - 2.2
------ -----
Fully Diluted Net Earnings $111.0 $92.5
====== =====
Earnings Per Share $ 1.47 $1.19
====== =====
</TABLE>
21
<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-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 172
<SECURITIES> 0
<RECEIVABLES> 2406
<ALLOWANCES> 58
<INVENTORY> 1097
<CURRENT-ASSETS> 3950
<PP&E> 3757
<DEPRECIATION> 2075
<TOTAL-ASSETS> 7959
<CURRENT-LIABILITIES> 4015
<BONDS> 900
0
0
<COMMON> 81
<OTHER-SE> 1866
<TOTAL-LIABILITY-AND-EQUITY> 7959
<SALES> 4064
<TOTAL-REVENUES> 4155
<CGS> 3124
<TOTAL-COSTS> 3951
<OTHER-EXPENSES> 17
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (76)
<INCOME-PRETAX> 111
<INCOME-TAX> 52
<INCOME-CONTINUING> 111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.47
</TABLE>
<PAGE>
EXHIBIT 99
RATIOS OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997
------------------------------------------
Applicance Financial Whirlpool
Business Services Corporation
---------- --------- -----------
<S> <C> <C> <C>
Pretax earnings $ 93.4 $17.6 $111.0
Portion of rents representative
of the interest factor 8.4 0.4 8.8
Interest on indebtedness 72.3 43.6 115.9
Amortization of debt expense
and premium 0.3 1.6 1.9
WFC preferred stock dividend - 3.0 3.0
------ ----- ------
Adjusted income $174.4 $66.2 $240.6
====== ===== ======
Fixed charges
Portion of rents representative
of the interest factor $ 8.4 $ 0.4 $ 8.8
Interest on indebtedness 72.3 43.6 115.9
Amortization of debt expense
and premium 0.3 1.6 1.9
WFC preferred stock dividend - 3.0 3.0
------ ----- ------
$ 81.0 $48.6 $129.6
====== ===== ======
Ratio of earnings to
fixed charges 2.15 1.36 1.86
====== ===== ======
Ratio of earnings to
fixed charges at
June 30, 1996 1.78 1.42 1.67
====== ===== ======
</TABLE>
23
