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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 1-3932
WHIRLPOOL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
38-1490038
DELAWARE (I.R.S. EMPLOYER IDENTIFICATION
(STATE OF INCORPORATION) NO.)
2000 NORTH M-63, BENTON HARBOR, MICHIGAN 49022-2692
(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (616) 923-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF CLASS ON WHICH REGISTERED
- -------------- ---------------------
<S> <C>
Common stock, par value $1.00 per share Chicago Stock Exchange
New York Stock Exchange
7 3/4% Debentures due 2016 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether 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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K X .
The aggregate market value of the voting stock of the registrant held by
stockholders not including voting stock held by directors and elected officers
of the registrant and certain employee plans of the registrant (the exclusion
of such shares shall not be deemed an admission by the registrant that any
such person is an affiliate of the registrant) on March 2, 1998, was
$4,889,641,109.
On March 2, 1998, the registrant had 75,740,288 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated herein by reference
into the Part of the Form 10-K indicated:
<TABLE>
<CAPTION>
PART OF FORM 10-K INTO
DOCUMENT WHICH INCORPORATED
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<S> <C>
The Company's annual report to stockholders for the
year ended
December 31, 1997 Parts I, II and IV
The Company's proxy statement for the 1998 annual
meeting of
stockholders (SEC File No. 1-3932) Part III
</TABLE>
EXHIBIT INDEX ON PAGE: **
TOTAL NUMBER OF PAGES: ***
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PART I
ITEM 1. BUSINESS.
GENERAL
Whirlpool Corporation, the leading worldwide manufacturer and marketer of
major home appliances, was incorporated in 1955 under the laws of Delaware as
the successor to a business that traces its origin to 1898. As used herein,
and except where the context otherwise requires, the term "Company" includes
Whirlpool Corporation and its consolidated subsidiaries. All currency figures
are in U.S. dollars.
RECENT DEVELOPMENTS
Global Restructuring:
On September 18, 1997, the Company announced and began executing an
extensive global restructuring plan that is intended to strengthen its global
business operations. Key features of the restructuring plan are described
below.
1) Sale of Whirlpool Financial Corporation assets:
The Company sold the bulk of the assets of its financial services
subsidiary, Whirlpool Financial Corporation ("WFC"). WFC provided inventory
and consumer financing services to the appliance, consumer electronics, lawn &
garden, home heating & air conditioning, and music industries. On September
17, 1997, the Company reached a definitive agreement to sell the majority of
WFC's assets in a series of transactions to Transamerica Distribution Finance
Corporation ("TDF"), subject to TDF obtaining appropriate government
approvals. During the fourth quarter, Whirlpool completed the sale of certain
inventory floor planning financing assets and international factoring assets
to TDF for approximately $927 million. In January 1998, the Company sold to
TDF certain remaining international assets and consumer financing receivable
assets for approximately $370 million. Under an ongoing strategic partnership,
TDF will continue to provide financing services to Whirlpool's trade partners
and customers. In separate transactions during the fourth quarter of 1997, the
Company sold certain consumer financing receivables for $98 million and
entered into an agreement to sell a portion of WFC's aerospace portfolio for
approximately $168 million. In the first two months of 1998, the Company
completed the sale of approximately $144 million of the aerospace assets to be
sold.
2) Latin America acquisition:
On November 3, 1997, Whirlpool purchased approximately 33 percent of the
voting shares, as well as certain non-voting shares, of Brasmotor S.A., the
Company's long-time Brazilian partner. The purchase price of the shares was
approximately $217 million. Combined with the Company's existing holdings, the
shares give Whirlpool a controlling interest of approximately 66 percent of
the voting shares of Brasmotor. Brasmotor is the parent company of Multibras
S.A. Eletrodomesticos ("Multibras"), an appliance company with sales of
approximately $1.6 billion and the leading market share position in Latin
America, and Empresa Brasileira de Compressores S.A. ("Embraco"), the world's
second largest hermetic compressor manufacturer with sales of approximately
$790 million.
3) Change cost structure:
On September 18, 1997, the Company announced plans to eliminate
approximately 4,700 positions throughout North America, Europe, and Asia
during the next 3 years. The workforce reductions will be realized through the
consolidation of various manufacturing, service, and support activities and
facilities. On January 13, 1998, the Company announced further restructuring
plans to improve efficiency and productivity in its Latin American operations.
The Latin American restructuring should be largely completed during the first
half of 1998,
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and will ultimately result in the elimination of about 3,200 positions which
represents approximately 25% of the Brazilian appliance company's workforce.
The Company took a pre-tax charge of approximately $343 million against 1997
earnings for the restructuring plans. When fully implemented by 2000, the
reductions are expected to result in an annualized savings of approximately
$200 million.
4) Refine Asian strategy:
The Company began executing a series of actions intended to improve the cost
structure and performance of its Asian operations. On December 1, 1997, the
Company agreed to sell its interest in Beijing Whirlpool Snowflake Electric
Appliance Co. Ltd., its Chinese joint venture that manufactures refrigerators,
to its joint venture partner for approximately $2 million. On December 15,
1997, the Company agreed to purchase an increased stake in Whirlpool Narcissus
Shanghai Co. Ltd., its Chinese joint venture that manufactures washing
machines, for approximately $12 million. The Company has received governmental
approval for both of these transactions. As previously announced, the Company
continues to explore alternatives, including sale or strategic alliance, with
respect to Shenzhen Whirlpool Raybo Air Conditioner Industrial Co. Ltd., its
joint venture that manufactures air conditioners. In a further effort to
reduce regional costs, the Company began consolidating most of the Asian
support activities into the global network.
Other Recent Developments:
In December 1996, a Brazilian federal court issued a favorable ruling
relating to export incentive claims submitted by Multibras and Embraco under a
Brazilian government sponsored program. In April 1997, Multibras and Embraco
submitted tax credit claims of approximately $440 million relating to certain
exports between July 1988 and December 1996. The court must render a final
decision on the amount, timing, and payment method of any final award. The
Company has not recognized any income relating to the claims relating to pre-
1997 sales because the timing and payment amount of such claims are uncertain.
Whirlpool completed construction of a new factory in Pune, India which
produces a line of no-frost refrigerators for the Indian market. The plant is
the first in India dedicated to CFC-free production of refrigerator products.
Pre-production activities were completed and limited production activities
began in December 1997.
FINANCIAL INFORMATION RELATING TO BUSINESS SEGMENTS,
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company operates predominantly in the business segment classified as
Major Home Appliances. Prior to the sale of WFC assets, the Company also
operated in the Financial Services business segment.
During 1997, the Company's U.S. operations sold product into Canada, Mexico,
Latin America, Asia, Europe, Africa, and the Middle East. However, export
sales by the Company's U.S. operations were less than 10 percent of gross
revenues.
For certain other financial information concerning the Company's business
segments and foreign and domestic operations, see Notes 1 and 15 of the Notes
to Consolidated Financial Statements in the Company's Annual Report to
Stockholders (the "Annual Report"), which information is incorporated herein
by reference.
PRODUCTS AND SERVICES
The Company manufactures and markets a full line of major home appliances
and related products for home and commercial use. The Company's principal
products are as follows:
Major Home Appliances:
Home laundry appliances: automatic and semi-automatic washers; automatic
dryers; coin-operated laundry machines; and stacked washer-dryer units.
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Home refrigeration and room air conditioning equipment: refrigerator-
freezers; upright and chest freezers; room air conditioners; dehumidifiers;
residential, commercial, and component ice makers; compact refrigerators;
and wine coolers.
Home cooking appliances: free-standing and set-in ranges; built-in ovens
and surface cooking units; microwave ovens; countertop cooking units; and
range hoods.
Small household appliances: stand mixers; hand mixers; food processors;
blenders; and toasters.
Other home appliances, products and services: dishwashers; residential
trash compactors; food waste disposers; hot water dispensers; water
filtration products; oil radiators; water heaters; kitchen sinks; component
parts, replacement parts, repair services and warranty contracts; and
product kits.
Components:
Hermetic compressors: Embraco supplies hermetic compressors to the
leading manufacturers of refrigeration systems worldwide, including
Whirlpool Corporation and Multibras.
Plastic components: Multibras da Amazonia manufactures television
cabinets and other injection-molded plastic components, primarily for the
brown-goods industry.
The Company purchases a portion of its product requirements from other
manufacturers for resale by the Company. The Company purchases some of its
requirements of automatic washers, washer/dryers, twin-tub washers, automatic
dryers, dishwashers, free-standing ranges, ovens, cooktops, air conditioners,
dehumidifiers, refrigerators, freezers, microwave ovens & trim kits, and hand
mixers, and all of its requirements of certain cooking products, range hoods,
food waste disposers, wine coolers, food processors, and certain other
miscellaneous products from other manufacturers for resale by the Company.
The following table sets forth information regarding the total revenue
contributed by each class of similar products which accounted for 10 percent
or more of the Company's consolidated revenue in 1997, 1996, and 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 (MILLIONS OF DOLLARS) PERCENT 1997 1996 1995
-------------------------------------------- ------- ------ ------ ------
<S> <C> <C> <C> <C>
Major Home Appliances
Home Laundry Appliances......................... 31% $2,704 $2,699 $2,593
Home Refrigeration and Room Air Conditioning
Equipment...................................... 34% $2,913 $3,078 $3,017
Home Cooking Appliances......................... 17% $1,434 $1,379 $1,321
Other Home Appliances and Appliance Components.. 18% $1,566 $1,367 $1,232
---- ------ ------ ------
Net Sales..................................... 100% $8,617 $8,523 $8,163
==== ====== ====== ======
</TABLE>
The Company has been the principal supplier of home laundry appliances to
Sears, Roebuck and Co. ("Sears") for over 80 years. The Company is also the
principal supplier to Sears of residential trash compactors, and a major
supplier to Sears of dishwashers and home refrigeration equipment. The Company
also supplies Sears with certain other products for which the Company is not
currently a major supplier. Sales of such other products to Sears are not
significant to the Company's business. The Company supplies products to Sears
for sale under Sears' KENMORE and SEARS brand names. Sears has also been a
major outlet for the Company's WHIRLPOOL and KITCHENAID brand names since
1989.
Major home appliances are marketed and distributed in the United States
under the WHIRLPOOL, KITCHENAID, ROPER, ESTATE, CHAMBERS, and COOLERATOR brand
names through Company-owned sales branches primarily to retailers, buying
groups, and builders. KITCHENAID portable appliances are sold to retailers
either directly or through an independent representative organization. The
Company sells product to the builder trade both directly and through contract
distributors. Major home appliances are manufactured and/or distributed in
Canada under the INGLIS, ADMIRAL, SPEED QUEEN, WHIRLPOOL, ESTATE, ROPER, and
KITCHENAID brand names. Refrigerator-
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freezers, laundry products, room air conditioners, residential trash
compactors, residential and component ice makers, cooking products,
dishwashers, and other products are sold in limited quantities by the Company
to other manufacturers and retailers for resale in North America under their
respective brand names.
In Europe, Whirlpool Europe markets and distributes its major home
appliances under the WHIRLPOOL, BAUKNECHT, IGNIS, ALGOR, and LADEN brand
names. In certain Eastern European countries, products bearing the WHIRLPOOL
and IGNIS brand names are sold through independent distributors. Whirlpool
Europe also has Company-owned sales subsidiaries in Hungary, Poland, the Czech
Republic, Slovakia, Greece, Romania, Bulgaria, Latvia, Estonia, Lithuania, and
Morocco, and a representative office in Russia. Whirlpool Europe owns a
subsidiary in South Africa through which it markets products under the
WHIRLPOOL and KIC brand names.
Whirlpool Europe also sells products carrying the WHIRLPOOL, BAUKNECHT,
IGNIS, ALGOR, and FIDES brand names to the Company's wholly-owned sales
companies in Asia and Latin America and to independent distributors and
dealers in Africa and the Middle East.
In Asia, the Company markets and distributes its major home appliances
through three operating regions: the Greater China region, based in Hong Kong,
which includes the Peoples Republic of China, Taiwan, and Hong Kong; the South
Asia region, based in Delhi, which includes India, Pakistan and other
surrounding markets; and the Asia Pacific Sales Region, which reports
operationally into Whirlpool Europe, and which includes Southeast Asia, Japan,
Korea, the Philippines, Thailand, Australia, and New Zealand. The Company
markets and sells its products in Asia under the WHIRLPOOL, KITCHENAID, IGNIS,
BAUKNECHT, and NARCISSUS brand names, as well as under the SMC and RAYBO brand
names (owned by its joint venture partners and used under license.) By early
1997, the Company had discontinued its previous licensed use of the KELVINATOR
OF INDIA name, the KELVINATOR brand, and the TVS brand. The Company also
discontinued its use of the SNOWFLAKE brand in 1997.
In Latin America, the Company markets and distributes its major home
appliances through regional networks under the WHIRLPOOL, BRASTEMP, CONSUL,
and ESLABON DE LUJO brand names. Appliance sales and distribution in Brazil,
Argentina, Bolivia, Chile, Paraguay, Uruguay, and Peru are managed through
subsidiaries owned by Multibras, the Company's Brazilian subsidiary, and
through independent distributors. Appliance sales and distribution in Central
American countries, the Caribbean, Venezuela, and Ecuador are managed through
Whirlpool sales subsidiaries which are part of Whirlpool's North America
Region and through independent distributors. In Colombia, the Company operates
a sales branch which sells and distributes products for the Colombian market.
COMPETITION
The major home appliance business is highly competitive. The Company
believes that, in terms of units sold annually, it is the largest United
States manufacturer of home laundry appliances and one of the largest United
States manufacturers of home refrigeration and room air conditioning
equipment, dishwashers, and cooking products. The Company estimates that
during 1997 with respect to U.S. manufacturers, there were approximately five
manufacturers of home laundry appliances, ten manufacturers of room air
conditioning equipment, five manufacturers of home refrigeration equipment,
five manufacturers of dishwashers, and five manufacturers of cooking products.
Competition in the North American major home appliance business is based on a
wide variety of factors, including principally product features, price,
product quality and performance, service, warranty, advertising, and
promotion.
The Company believes that Whirlpool Europe, in terms of units sold annually,
is one of the three largest manufacturers and marketers of major home
appliance products in Europe. The Company estimates that during 1997 there
were approximately 35 European manufacturers of major home appliances, the
majority of which manufacture a limited range of products for a specific
geographic region. In recent years, there has been significant merger and
acquisition activity as manufacturers seek to broaden product lines and expand
geographic markets, and the Company believes that this trend will continue.
The Company believes that, with Whirlpool
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Europe, it is in a favorable position relative to its competitors because it
has an experienced European sales network, balanced sales throughout the
European market under well-recognized brand names, manufacturing facilities
located in different countries, and the ability to customize its products to
meet the specific needs of diverse consumer groups. Competition in the
European major home appliance business is based on a wide variety of factors,
including principally product features, price, product quality and
performance, service, warranty, advertising, and promotion. With respect to
microwave ovens, Western European manufacturers face competition from
manufacturers in Asia, primarily Japan, China and South Korea.
In Asia, the major domestic appliance market is characterized by rapid
growth and is dominated primarily by Asian diversified industrial
manufacturers whose significant size and scope of operations enable them to
achieve economies of scale. The Company estimates that during 1997 there were
approximately 50 manufacturers of major home appliances competing in the Asian
market. Competition in the Asian home appliance business is based on a wide
variety of factors including principally local production capabilities,
product features, price, product quality, and performance.
The Company believes that it is well-positioned in the Latin American
appliance market due to its ability to offer a broad range of products under
well-recognized brand names such as WHIRLPOOL, BRASTEMP, CONSUL, and ESLABON
DE LUJO to meet the specific requirements of consumers in the region. The
Company estimates that during 1997 there were approximately 65 manufacturers
of home appliances in the region. Competition in the Latin American home
appliance business is based on a wide variety of factors, including
principally product features, price, product quality and performance, service,
warranty, advertising, and promotion. In Latin America there are trends toward
privatization of government-owned businesses and a liberalization of
investment and trade restrictions. In addition, the Company exports products
to the Latin American market under the WHIRLPOOL brand name.
As a result of its global expansion, the Company believes it may have a
competitive advantage by reason of its ability to leverage engineering
capabilities across regions, transfer best practices, and economically
purchase raw materials and component parts in large volumes.
EMPLOYEES
The Company and its consolidated subsidiaries had approximately 61,000
employees as of December 31, 1997.
OTHER INFORMATION
On November 3, 1997, the Company acquired a controlling equity interest in
Brasmotor S.A., the Company's long-time partner in Latin America and the
parent company of certain Latin American manufacturers of major home
appliances and components (Multibras and Embraco). As a result of its
acquisition, the Company now includes Brasmotor in its consolidated financial
statements rather than as an equity interest. The Company has a minority
equity interest in a Mexican manufacturer of home appliances and components.
In China, the Company has majority interests in joint venture companies that
manufacture air conditioners, microwave ovens, and automatic washing machines
for sale and distribution in their home countries and for export. The Company
also has a minority equity interest in China in a compressor manufacturing
joint venture between its Brazilian subsidiary and a company in China which
manufactures refrigeration products. The Company received final government
approval of its exit from its Chinese joint venture company that manufactures
refrigeration products. The Company continues to consider alternatives,
including possible sale or strategic alliance, for its Chinese joint venture
company that manufactures air conditioning products. In India, the Company has
a majority interest in a company that produces refrigeration products and
washing machines for the Indian market and for export to the rest of Asia. The
Company also has a minority equity interest in a Taiwanese marketer and
distributor of home appliances. The company has a significant minority equity
interest in a major manufacturer of kitchen furniture in Germany which is also
a major trade customer of the Company. In addition, the Company furnishes
engineering, manufacturing and marketing assistance to certain foreign
manufacturers of home laundry and refrigeration equipment and other major home
appliances for negotiated fees.
5
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The Company's interests outside the United States and Western Europe are
subject to risks which may be greater than or in addition to those risks which
are currently present in the United States and Western Europe. Such risks may
include: high inflation; the need for governmental approval of and
restrictions on certain financial and other corporate transactions and new or
continued business operations; the convertibility of local currencies;
government price controls; restrictions on the remittance of dividends,
interest, royalties, and other payments; restrictions on imports and exports;
duties; political and economic developments and instability; the possibility
of expropriation; uncertainty as to the enforceability of commercial rights
and trademarks; and various types of local participation in ownership.
In Brazil, the Company's subsidiaries were profitable in 1997 despite a
decrease in consumer demand versus 1996. These results are due in part to
successful efforts to control cost and boost productivity. However, issues
such as unemployment, increasing interest rates, limited consumer credit, and
exchange rate changes continue to affect consumer purchasing power and the
appliance industry as a whole.
The recent instability of Asian currencies may adversely affect the
Company's performance in certain Asian markets, primarily due to the reduced
profitability of import product sales and decreased consumer confidence.
Economic growth in the region may be adversely affected through 1998 and
beyond. The Company's exposure to such risks was reduced as a result of its
recent restructuring activities.
The Company is generally not dependent upon any one source for raw materials
or purchased components essential to its business. In those areas where a
single supplier is used, alternative sources are generally available and can
be developed within the normal manufacturing environment, although some
unanticipated costs may be incurred in transitioning to a new supplier where a
prior single supplier is abruptly terminated. While there are pricing
pressures on some materials and significant demand for certain components, it
is believed that such raw materials and components will be available in
adequate quantities to meet anticipated production schedules.
Patents presently owned by the Company are considered, in the aggregate, to
be important to the conduct of the Company's business. The Company is licensed
under a number of patents, none of which individually is considered material
to its business. The Company is the owner of a number of trademarks and the
U.S. and foreign registrations thereof. The most important for its North
American operations are the trademarks WHIRLPOOL, KITCHENAID, the KITCHENAID
Mixer Shape, ROPER, and INGLIS. Whirlpool Europe, through its subsidiaries, is
also the owner of a number of trademarks and the foreign registrations
thereof. The most important trademarks owned by Whirlpool Europe are
BAUKNECHT, IGNIS, and LADEN. The most important trademark for the Company's
European, Asian and Latin American operations is WHIRLPOOL. The most important
trademark licensed to the Company's subsidiaries is the trademark PHILIPS and
the PHILIPS shield emblem, which can be used exclusively on major home
appliances by such subsidiaries until July 31, 1998. In the event of a change
in control of the Company, Philips ("Philips") has the option to terminate the
use by the Company's subsidiaries of the trademark PHILIPS and the PHILIPS
shield emblem. Pursuant to the agreement whereby the Company purchased most of
Whirlpool Europe's business from Philips, except for certain limited
exceptions and subject to certain phase-out provisions, neither Philips nor
any subsidiary of Philips may engage directly or indirectly in the major
domestic appliance business anywhere in the world until July 31, 1998.
The Company believes that its business, in the aggregate, is not seasonal.
Certain of its products, however, sell more heavily in some seasons than in
others. For example, air conditioners typically sell more heavily during
summer months. Where appropriate, the Company manages its regional
manufacturing operations and product inventories to address seasonal
variations in demand.
Backlogs of the Company's products are filled and renewed relatively
frequently in each year and are not significant in relation to the Company's
annual sales. However, with respect to Asia, marked seasonality of certain
product sales, combined with less efficient modes of distribution in that
region, can result in significant inventory backlogs.
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Expenditures for Company-sponsored research and engineering activities
relating to the development of new products and the improvement of existing
products are included in Note 1 of the Notes to Consolidated Financial
Statements in the Annual Report, which is incorporated herein by reference.
Customer-sponsored research activities relating to the development of new
products, services or techniques, or the improvement of existing products,
services, or techniques are not material.
The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect or enhance the environment, many of which
require federal, state or other governmental licenses and permits with regard
to wastewater discharges, air emissions, and hazardous waste management. These
laws are continually changing and, as a general matter, are becoming more
restrictive. The Company's policy is to seek to comply with all such laws and
regulations.
The Company believes that it is in compliance in all material respects with
all presently applicable federal, state, local, and other provisions relating
to environmental protection in the countries in which it has manufacturing
operations. Capital expenditures and expenses attributable to compliance with
such provisions worldwide amounted to approximately $58 million in 1995, $50
million in 1996, and $48 million in 1997. The Company anticipates that such
capital expenditures and expenses will aggregate approximately $57 million in
1998. Much of the decrease from 1995 to 1997 is attributable to the phase-out
of chloroflourocarbons ("CFCs") and is associated with the elimination of
taxes on CFC's (CFC's were eliminated from the Company's products in the
United States prior to December 31, 1995). The anticipated increase from 1997
to 1998 is associated with investments related to the phase-out of CFC's in
South America. The Company is using a global environmental management process
to assist in achieving its goals of producing environmentally compatible
products, better integrating environmental considerations into the Company's
product design and employee training, and improving the Company's ability to
monitor its management of environmental, health, and safety affairs.
The entire United States home appliance industry, including the Company,
must contend with the adoption of stricter governmental energy and
environmental standards to be phased in over the next several years. These
include the general phase-out of CFCs used in refrigeration and energy
standards rulemakings for other selected major appliances produced by the
Company. Enactment of federal energy standards is uncertain at this time due
to funding and rulemaking restrictions being considered for the Department of
Energy by the U.S. Congress. Compliance with these various standards as they
become effective will require some product redesign.
As in the United States, Whirlpool Europe is also dealing with anticipated
regulations and rules regarding improved efficiency and energy usage for its
products. The Company believes it is well positioned to field products that
comply with these anticipated regulations. In most Asian and Latin American
countries, the Company has until 2010 to eliminate CFCs from its products.
Whirlpool's Asian operations are also well positioned to meet anticipated
efficiency and energy usage regulations.
The Company has been notified by state and federal environmental protection
agencies of its possible involvement in a number of so-called "Superfund"
sites in the United States. However, the Company does not presently anticipate
any material adverse effect upon the Company's earnings or financial condition
arising out of the resolution of these matters or the resolution of any other
known governmental proceeding regarding environmental protection matters. The
Company has completed environmental assessments of its European facilities
acquired as a result of the Company's purchase of the Major Domestic Appliance
division of Philips. The Company does not presently anticipate any material
adverse effect upon the Company's earnings or financial condition arising out
of the resolution of these matters. The Company has also evaluated several
recently acquired facilities in China and India. The Company does not
presently anticipate any material adverse effect upon the Company's earnings
or financial condition from the environmental condition of these facilities.
The Company does not anticipate any material adverse effect on its
operations or performance as a result of the Year 2000 computer software
issue. The Company is evaluating its products for Year 2000 compliance and
does not anticipate that any significant problems will be experienced due to
the Year 2000 issue. Key internal computer systems have been evaluated for
Year 2000 compliance and regional remediation plans have been
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completed. Work is underway to replace or upgrade key internal systems to
ensure they remain operational up to and beyond December 31, 1999. The Company
anticipates that Year 2000 remediation projects will be successfully completed
according to plan and that the costs of such projects will not be material to
the Company.
In an effort to enhance productivity and business systems performance, the
Company is implementing an integrated business software package to replace and
consolidate many of its existing stand-alone systems. In certain Latin
American and European countries, implementation of the new system is expected
to be completed prior to the end of 1999, while implementation in North
America is scheduled to occur over the next 3 years.
The following table sets forth the names of the Company's executive officers
at December 31, 1997, the positions and offices with the Company held by them
at such date, the year they first became officers, and their ages at December
31, 1997:
<TABLE>
<CAPTION>
FIRST BECAME
NAME OFFICE AN OFFICER AGE
---- ------ ------------ ---
<S> <C> <C> <C>
David R. Director, Chairman of the Board and 1983 55
Whitwam Chief Executive Officer
William D. 1984 57
Marohn Director and Vice Chairman of the Board
Ralph F. Senior Executive Vice President and 1988 48
Hake Chief Financial Officer
Jeff M. Executive Vice President and 1993 40
Fettig President, Whirlpool Europe
Robert D. Executive Vice President and 1992 49
Hall President, Whirlpool Asia
Ronald L. Executive Vice President and 1991 54
Kerber Chief Technology Officer
Paulo F.M. 1997 51
Periquito Executive Vice President, Latin American Region
Michael D. 1997 49
Thieneman Executive Vice President, North American Region
</TABLE>
Each of the executive officers named above was elected to serve in the
office indicated until the first meeting of the Board of Directors following
the annual meeting of stockholders in 1998 and until his successor is chosen
and qualified or until his earlier resignation or removal.
Each of the executive officers of the Company has held the position set
forth in the table above or has served the Company in various executive or
administrative capacities for at least the past five years, except for:
<TABLE>
<CAPTION>
NAME COMPANY/POSITION PERIOD
---- ---------------- ------
<S> <C> <C>
Paulo March, 1996 through present
F.M. Multibras S.A.
Periquito Chief Executive Officer
ALCOA Latin America 1981 through March, 1996
Executive Vice President and Chief Operating
Officer (last title held)
</TABLE>
ITEM 2. PROPERTIES.
The principal executive offices of Whirlpool Corporation are located in
Benton Harbor, Michigan. At December 31, 1997, the principal manufacturing and
service operations of the Company were carried on at 48 locations worldwide,
36 of which are located in 12 countries outside the United States. The Company
occupied a total of approximately 37 million square feet devoted to
manufacturing, service, administrative offices, warehouse, distribution and
sales space. Over 10.5 million square feet of such space is occupied under
lease. In general, all such facilities are well maintained, suitably equipped
and in good operating condition. In 1997, a new manufacturing plant was opened
in Pune, India and began limited operations in December.
8
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
As of, and during the quarter ended, December 31, 1997, there were no
material pending legal proceedings to which the Company or any of its
subsidiaries was a party or to which any of their property was subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders in the fourth
quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the New York Stock Exchange, the
Chicago Stock Exchange, and the London Stock Exchange.
At March 2, 1998, the number of holders of record of the Company's common
stock was approximately 14,468.
High and low sales prices (as reported on the New York Stock Exchange
composite tape) and cash dividends declared and paid for the Company's common
stock for each quarter during the years 1996 and 1997 are set forth in Note 16
of the Notes to Consolidated Financial Statements in the Annual Report, which
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data for the five years ended December 31, 1997 with
respect to the following line items shown under the "Eleven Year Consolidated
Statistical Review" in the Annual Report is incorporated herein by reference
and made a part of this report: Total revenues; earnings from continuing
operations before accounting change; earnings from continuing operations
before accounting change per share of common stock; dividends paid per share
of common stock; total assets; and long-term debt. See the material
incorporated herein by reference in response to Item 7 of this report for a
discussion of the effects on such data of business combinations and other
acquisitions, disposition and restructuring activity, restructuring costs,
accounting changes, and earnings of foreign affiliates.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Management's Discussion and Analysis of Results of Operations and
Financial Condition in the Annual Report is incorporated herein by reference
and made a part of this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company in the Annual Report
are incorporated herein by reference and made a part of this report.
Supplementary financial information regarding quarterly results of operations
(unaudited) for the years ended December 31, 1997 and 1996 is set forth in
Note 16 of the Notes to Consolidated Financial Statements. For a list of
financial statements and schedules filed as part of this report, see the
"Index to Financial Statements and Financial Statement Schedule(s)" beginning
on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
9
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to directors of the Company is incorporated herein
by reference to the information under the caption "Directors and Nominees for
Election as Directors" in the Company's proxy statement for the 1998 annual
meeting of stockholders (SEC File No. 1-3932) (the "Proxy Statement").
Information with respect to executive officers of the Company is set forth in
Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to compensation of executive officers and directors
of the Company is incorporated herein by reference to the information under
the captions "Executive Compensation" and "Compensation of Directors" in the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership by the only person(s) known
to the Company to beneficially own more than 5 percent of the Company's stock
and by each director of the Company and all directors and elected officers of
the Company as a group is incorporated herein by reference to the information
under the caption "Security Ownership" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain transactions with executive officers and
directors of the Company and others is incorporated herein by reference to the
information under the caption "Certain Transactions" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. The financial statements listed in the "Index to Financial Statements
and Financial Statement Schedules."
2. The financial statement schedule listed in the "Index to Financial
Statements and Financial Statement Schedules."
3. The exhibits listed in the "Index to Exhibits."
(b) Reports on Form 8-K filed during the fourth quarter of 1997.
1. A Current Report on Form 8-K for October 15, 1997 pursuant to Item 5--
"Other Events" announced the Company's third quarter 1997 earnings, and the
Company's sale of certain assets of Whirlpool Financial Corporation ("WFC")
to Transamerica Distribution Finance Corporation ("TDF").
2. A Current Report on Form 8-K for November 1, 1997 pursuant to Item 2--
"Acquisition or Disposition of Assets" announced the sale of certain
additional WFC assets to TDF, and pursuant to Item 5--"Other Events"
announced the acquisition of approximately 33% of the voting shares of
Brasmotor S.A. Included were an unaudited pro forma condensed balance sheet
as of September 30, 1997 and unaudited pro forma condensed statements of
earnings for the year ended December 31, 1996 and for the nine months ended
September 30, 1997.
3. A Current Report on Form 8-K for December 1, 1997 pursuant to Item 5--
"Other Events" announced the resignation of Eileen A. Kamerick as Vice
President and Treasurer, and the naming of Brian F. Peters as her
successor, and the resignation of Daniel Miller, Executive Vice President,
Whirlpool Latin America.
10
<PAGE>
4. A Current Report on Form 8-K for December 9, 1997 pursuant to Item 5--
"Other Events" announced the resignation of John P. Cunningham as Executive
Vice President and Chief Financial Officer and the naming of Ralph F. Hake
as his successor.
(c) Exhibits.
1. The following exhibits are included herein:
(11) Computation of per share earnings.
(12) Computation of the ratios of earnings to fixed charges.
(27) Financial Data Schedule.
2. The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate
section of this report.
11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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)
/s/ Ralph F. Hake
By: _________________________________
Ralph F. Hake
(Principal Financial Officer)
Senior Executive Vice President
of Operations and Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
David R. Whitwam* Director, Chairman of the
____________________________________ Board and Chief Executive
David R. Whitwam Officer (Principal
Executive Officer)
William D. Marohn* Director, and Vice Chairman
____________________________________ of the Board
William D. Marohn
Ralph F. Hake* Senior Executive Vice
____________________________________ President
Ralph F. Hake of Operations and
Chief Financial Officer
(Principal Financial
Officer)
Mark E. Brown* Vice President and
____________________________________ Controller (Principal
Mark E. Brown Accounting Officer)
Robert A. Burnett* Director
____________________________________
Robert A. Burnett
Herman Cain* Director March 20, 1998
____________________________________
Herman Cain
Gary T. DiCamillo* Director
____________________________________
Gary T. DiCamillo
H. Miguel Etchenique* Director
____________________________________
H. Miguel Etchenique
Allan D. Gilmour* Director
____________________________________
Allan D. Gilmour
Kathleen J. Hempel* Director
____________________________________
Kathleen J. Hempel
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Arnold G. Langbo* Director
____________________________________
Arnold G. Langbo
Miles L. Marsh* Director
____________________________________
Miles L. Marsh
Philip L. Smith* Director March 20, 1998
____________________________________
Philip L. Smith
Paul G. Stern* Director
____________________________________
Paul G. Stern
Janice D. Stoney* Director
____________________________________
Janice D. Stoney
</TABLE>
/s/ Daniel F. Hopp
*By: __________________________
Daniel F. Hopp
Attorney-in-Fact
13
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEMS 14(A) (1) AND (2) AND 14(D)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE(S)
YEAR ENDED DECEMBER 31, 1997
WHIRLPOOL CORPORATION AND CONSOLIDATED SUBSIDIARIES
The following consolidated financial statements of the registrant and its
consolidated subsidiaries, set forth in the Annual Report, are incorporated
herein by reference in Item 8:
Consolidated balance sheets--December 31, 1997 and 1996
Consolidated statements of earnings--Three years ended December 31,
1997
Consolidated statements of cash flows--Three years ended December 31,
1997
Notes to consolidated financial statements
The following reports of independent auditors and consolidated financial
statement schedules of the registrant and its consolidated subsidiaries are
submitted herewith in response to Items 14(a) (2) and 14(d):
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young L.L.P., Independent Auditors................... F-2
Reports of Price Waterhouse, Independent Auditors...................... F-3
Schedule II--Valuation and Qualifying Accounts......................... F-9
The following exhibits are included herein:
Exhibit 11--Statement Re: Computation of Earnings Per Share............ F-10
Exhibit 12--Ratio of Earnings to Fixed Charges......................... F-11
</TABLE>
Individual financial statements of the registrant's affiliated foreign
companies, accounted for by the equity method, have been omitted since no such
company individually constitutes a significant subsidiary. Summarized
financial information relating to the affiliated companies is set forth in
Note 5 of the Notes to Consolidated Financial Statements incorporated by
reference herein.
Certain schedules for which provisions are made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Report Of Independent Auditors
The Stockholders and Board of Directors
Whirlpool Corporation
Benton Harbor, Michigan
We have audited the accompanying consolidated balance sheets of Whirlpool
Corporation as of December 31, 1997 and 1996, and the related consolidated
statements of earnings and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Brasmotor S.A. and its consolidated subsidiaries, which statements
reflect total assets of $2,200 million and $2,100 million as of December 31,
1997 and 1996, respectively and net earnings of $41 million and $120 million for
the years ended December 31, 1997 and 1996, respectively. Those statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to data included for Brasmotor S.A. and its
consolidated subsidiaries, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits and the reports of the other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Whirlpool Corporation at December 31,
1997 and 1996, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young L.L.P.
Chicago, Illinois
January 26, 1998
F-2
<PAGE>
Report of Independent Accountants
January 23, 1998
To the Board of Directors and Stockholders
Brasmotor S.A.
1 We have audited the consolidated balance sheets of Brasmotor S.A. and its
subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of earnings, of movement in stockholders' equity and of cash
flows for the years then ended, expressed in U.S. dollars (not presented
herein). Such audits were made in conjunction with our audits of the
financial statements expressed in local currency on which we issued an
unqualified opinion dated January 23, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We
did not audit the financial statements of Whirlpool Argentina S.A., which
statements reflect total assets of US$ 119,549 thousand and US$ 98,444
thousand as of December 31, 1997 and 1996, respectively and net earnings of
US$ 9,487 thousand and US$ 4,710 thousand for the years ended December 31,
1997 and 1996, respectively. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar
as it relates to data included for Whirlpool Argentina S.A., is based
solely on the reports of the other auditors.
2 We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of the other auditors provide a reasonable
basis for our opinion.
F-3
<PAGE>
January 23, 1998
Brasmotor S.A.
Page 2
3 As stated in Note 1, Whirlpool Corporation has prescribed that accounting
principles generally accepted in the United States of America be applied in
the preparation of the consolidated financial statements of Brasmotor S.A.
and its subsidiaries to be included in Whirlpool's consolidated financial
statements. Brazil has a highly inflationary economy. Accounting principles
generally accepted in the United States of America require that financial
statements of a company denominated in the currency of a country with a
highly inflationary economy be remeasured into a more stable currency unit
for purposes of consolidation. Accordingly, the accounts of Brasmotor S.A.
and its Brazilian subsidiaries, which are maintained in reais, were
remeasured and adjusted into U.S. dollars for the financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America, on the bases stated in Note 1.
4 In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements expressed in U.S. dollars audited by
us are presented fairly, in all material respects, on the bases stated in
Note 1 and discussed in the preceding paragraph.
/s/ Price Waterhouse
F-4
<PAGE>
Report of Independent Accountants
January 23, 1998
To the Board of Directors and Stockholders
Empresa Brasileira de Compressores S.A. - EMBRACO
1 We have audited the consolidated balance sheets of Empresa Brasileira de
Compressores S.A. - EMBRACO and its subsidiaries as of December 31, 1997
and 1996 and the related consolidated statements of earnings, of movement
in stockholders' equity and of cash flows for the years then ended,
expressed in U.S. dollars (not presented herein). Such audits were made in
conjunction with our audits of the financial statements expressed in local
currency on which we issued an unqualified opinion dated January 23, 1998.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
2 We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
F-5
<PAGE>
January 23, 1998
Empresa Brasileira de Compressores S.A. - EMBRACO
Page 2
3 As stated in Note 1, Whirlpool Corporation has prescribed that accounting
principles generally accepted in the United States of America be applied in
the preparation of the consolidated financial statements of Empresa
Brasileira de Compressores S.A. - EMBRACO and its subsidiaries to be
included in Whirlpool's consolidated financial statements. Brazil has a
highly inflationary economy. Accounting principles generally accepted in
the United States of America require that financial statements of a company
denominated in the currency of a country with a highly inflationary economy
be remeasured into a more stable currency unit for purposes of
consolidation. Accordingly, the accounts of Empresa Brasileira de
Compressores S.A. - EMBRACO and its Brazilian subsidiaries, which are
maintained in reais, were remeasured and adjusted into U.S. dollars for the
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America, on the bases stated in
Note 1.
4 In our opinion, the consolidated financial statements expressed in U.S.
dollars audited by us are presented fairly, in all material respects, on
the bases stated in Note 1 and discussed in the preceding paragraph.
/s/ Price Waterhouse
F-6
<PAGE>
Report of Independent Accountants
January 23, 1998
To the Board of Directors and Stockholders
Multibras S.A. Eletrodomesticos
1 We have audited the consolidated balance sheets of Multibras S.A.
Eletrodomesticos and its subsidiaries as of December 31, 1997 and 1996 and
the related consolidated statements of earnings, of movement in
stockholders' equity and of cash flows for the years then ended, expressed
in U.S. dollars (not presented herein). Such audits were made in
conjunction with our audits of the financial statements expressed in local
currency on which we issued an unqualified opinion dated January 23, 1998.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements
of Whirlpool Argentina S.A. , which statements reflect total assets of US$
119,549 thousand as of December 31, 1997 and net earnings of US$ 9,487
thousand for the year ended December 31, 1997. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for Whirlpool Argentina
S.A. is based solely on the report of the other auditors.
2 We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits and the report of the other auditors provide a reasonable
basis for our opinion.
F-7
<PAGE>
January 23, 1998
Multibras S.A. Eletrodomesticos
Page 2
3 As stated in Note 1, Whirlpool Corporation has prescribed that accounting
principles generally accepted in the United States of America be applied in
the preparation of the consolidated financial statements of Multibras S.A.
Eletrodomesticos and its subsidiaries to be included in Whirlpool's
consolidated financial statements. Brazil has a highly inflationary
economy. Accounting principles generally accepted in the United States of
America require that financial statements of a company denominated in the
currency of a country with a highly inflationary economy be remeasured into
a more stable currency unit for purposes of consolidation. Accordingly, the
accounts of Multibras S.A. Eletrodomesticos and its Brazilian subsidiaries,
which are maintained in reais, were remeasured and adjusted into U.S.
dollars for the financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, on the bases
stated in Note 1.
4 In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements expressed in U.S. dollars audited by
us are presented fairly, in all material respects, on the bases stated in
Note 1 and discussed in the preceding paragraph.
/s/ Price Waterhouse
F-8
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ --------- ------------------ ----------- -------
ADDITIONS
------------------ -------
(1) (2)
BALANCE CHARGED CHARGED BALANCE
AT TO COSTS TO OTHER AT END
BEGINNING AND ACCOUNTS/ DEDUCTIONS- OF
DESCRIPTION OF PERIOD EXPENSES OTHER DESCRIBE PERIOD
----------- --------- -------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
1997:
Allowances for
doubtful accounts--
trade receivables.... $ 45 $ 34 $55(A) $ 0(B) $134
==== ===== === ==== ====
Allowances for
doubtful accounts--
financing receivables
and leases........... $ 50 $ 125 $ 0 $ 85(C) $ 90
==== ===== === ==== ====
Accrued expenses--
restructuring costs.. $ 32 $ 343 $ 5(D) $168(E) $212
==== ===== === ==== ====
Year Ended December 31,
1996:
Allowances for
doubtful accounts--
trade receivables.... $ 39 $ 15 $ 9(B) $ 45
==== ===== ==== ====
Allowances for
doubtful accounts--
financing receivables
and leases........... $ 42 $ 48 $ 40(C) $ 50
==== ===== ==== ====
Accrued expenses--
restructuring costs.. $ 70 $ 30 $ 68(E) $ 32
==== ===== ==== ====
Year Ended December 31,
1995:
Allowances for
doubtful accounts--
trade receivables.... $ 38 $ 16 $ 15(B) $ 39
==== ===== ==== ====
Allowances for
doubtful accounts--
financing receivables
and leases........... $ 46 $ 34 $ 38(C) $ 42
==== ===== ==== ====
Accrued expenses--
restructuring costs.. $175 $ -- $105(E) $ 70
==== ===== ==== ====
</TABLE>
- --------
Note A--The amount represents the allowance for doubtful accounts balance on
the balance sheet of Brasmotor S.A. at the time of consolidation in 1997.
Note B--The amounts represent accounts charged off, less recoveries of $15 in
1997, $7 in 1996, and $5 in 1995, and translation adjustments.
Note C--The amounts represent accounts charged off, less recoveries of $4 in
1997, and $3 in 1996 and 1995.
Note D--The amount represents the restructuring provision on the balance sheet
of Brasmotor S.A. at the time of consolidation in 1997.
Note E--Includes cash payments for employee severance and related costs, lease
terminations, facility dispositions and other cash costs; write-down of
facilities, equipment and other assets; and translation adjustments.
F-9
<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(ALL AMOUNTS IN MILLIONS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Basic:
Average Shares Outstanding............................. 74.7 74.3 73.9
Earnings (Loss):
Continuing Operations................................ $(46.4) $140.9 $195.5
Discontinued Operations.............................. 31.6 14.9 13.9
------ ------ ------
Net Earnings (Loss).................................... $(14.8) $155.8 $209.4
====== ====== ======
Earnings (Loss) Per Share from Continuing Operations... $(0.62) $ 1.90 $ 2.64
Net Earnings (Loss) Per Share.......................... $(0.20) $ 2.10 $ 2.83
====== ====== ======
Diluted:
Average Shares Outstanding............................. 74.7 74.3 73.9
Treasury Stock Method (a):
Stock Options........................................ -- 0.7 0.7
Assumed Conversion of Debt............................. -- 2.2 2.2
------ ------ ------
Average Shares Outstanding............................... 74.7 77.2 76.8
====== ====== ======
Earnings (Loss) from Continuing Operations............. $(46.4) $140.9 $195.5
Interest Expense, net of tax........................... -- 4.5 4.2
------ ------ ------
Diluted Earnings (Loss) from Continuing Operations..... $(46.4) $145.4 $199.7
====== ====== ======
Diluted Earnings (Loss) Per Share from Continuing
Opeations............................................. $(0.62) $ 1.88 $ 2.60
====== ====== ======
Net Earnings (Loss).................................... $(14.8) $155.8 $209.4
Interest Expense, net of tax........................... -- 4.5 4.2
------ ------ ------
Diluted Net Earnings (Loss)............................ $(14.8) $160.3 $213.6
====== ====== ======
Diluted Net Earnings (Loss) Per Share.................. $(0.20) $ 2.08 $ 2.78
====== ====== ======
</TABLE>
- --------
(a) Using the average market price per share of stock for the period; effect
of stock options precipitates an anti-dilutive calculation in 1997, and
therefore not included; convertible debt retired in 1997.
F-10
<PAGE>
EXHIBIT 12--RATIO OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------
APPLIANCE FINANCIAL WHIRLPOOL
BUSINESS SERVICES CORPORATION
--------- --------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Pretax earnings................................ $(171) $(7) $ (178)
Portion of rents representative of the interest
factor........................................ 20 1 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
Adjusted income................................ $ 17 $77 $ 94
===== === ======
<CAPTION>
FIXED CHARGES
- -------------
<S> <C> <C> <C>
Portion of rents representative of the interest
factor........................................ $ 20 $ 1 $ 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
$ 188 $84 $ 272
===== === ======
Ratio of earnings to fixed charges............. 0.1 0.9 0.3
===== === ======
</TABLE>
F-11
<PAGE>
EXHIBIT 12 - RATIO OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------
APPLIANCE FINANCIAL WHIRLPOOL
BUSINESS SERVICES CORPORATION
--------- --------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Pretax earnings................................ $(171) $(7) $ (178)
Portion of rents representative of the interest
factor........................................ 20 1 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
Adjusted income................................ $ 17 $77 $ 94
===== === ======
<CAPTION>
FIXED CHARGES
- -------------
<S> <C> <C> <C>
Portion of rents representative of the interest
factor........................................ $ 20 $ 1 $ 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
$ 188 $84 $ 272
===== === ======
Ratio of earnings to fixed charges............. 0.1 0.9 0.3
===== === ======
</TABLE>
F-12
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEMS 14(A)(3) AND 14(C)
INDEX TO EXHIBITS
YEAR ENDED DECEMBER 31, 1997
The following exhibits are submitted herewith or incorporated herein by
reference in response to Items 14(a)(3) and 14(c):
<TABLE>
<CAPTION>
NUMBER AND SEQUENTIAL
DESCRIPTION PAGE
OF EXHIBIT NUMBERS*
----------- ----------
<C> <C> <S> <C>
3(i) Restated Certificate of Incorporation of the Com-
pany [Incorporated by reference from Exhibit 3(i)
to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993]
3(ii) Amended and Restated By-laws of the Company as
amended February 17, 1998.
4 The registrant hereby agrees to furnish to the
Securities and Exchange Commission, upon request,
the instruments defining the rights of holders of
each issue of long-term debt of the registrant
and its subsidiaries.
10(iii) (a) Whirlpool Retirement Benefits Restoration Plan
(as amended January 1, 1992) [Incorporated by
reference from Exhibit 10(iii)(a) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1993]
10(iii) (b) 1979 Stock Option Plan (as amended April 28,
1987) [Incorporated by reference from Exhibit
10(iii)(b) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993]
10(iii) (c) Whirlpool Supplemental Executive Retirement Plan
(as amended and restated effective December 31,
1993) [Incorporated by reference from Exhibit
10(iii)(c) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993]
10(iii) (d) Resolution adopted on December 12, 1989 by the
Board of Directors of the Company adopting a com-
pensation schedule, life insurance program and
retirement benefit program for eligible Direc-
tors. [Incorporated by reference from Exhibit
10(iii)(d) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993]
10(iii) (e) Resolution adopted on December 8, 1992 by the
Board of Directors of the Company adopting a
Flexible Compensation Program for the Corpora-
tion's nonemployee directors. [Incorporated by
reference from Exhibit 10(iii)(e) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1993]
10(iii) (f) Whirlpool Corporation Deferred Compensation Plan
for Directors (as amended effective January 1,
1992 and April 20, 1993) [Incorporated by refer-
ence from Exhibit 10(iii)(f) to the Company's An-
nual Report on Form 10-K for the fiscal year
ended December 31, 1993]
10(iii) (g) Form of Agreement providing for severance bene-
fits for certain executive officers [Incorporated
by reference from Exhibit 10(iii)(g) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1993]
10(iii) (h) Whirlpool Corporation 1989 Omnibus Stock and In-
centive Plan (as amended June 20, 1995) [Incorpo-
rated by reference from Exhibit 10(iii)(r) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1995]
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER AND SEQUENTIAL
DESCRIPTION PAGE
OF EXHIBIT NUMBERS*
----------- ----------
<C> <C> <S> <C>
10(iii) (i) Whirlpool Corporation Restricted Stock Value Pro-
gram (Pursuant to the 1989 Whirlpool Corporation
Omnibus Stock and Incentive Plan) [Incorporated
by reference from Exhibit 10(iii)(i) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1993]
10(iii) (j) Whirlpool Executive Stock Appreciation and Per-
formance Program (Pursuant to the 1989 Whirlpool
Corporation Omnibus Stock and Incentive Plan)
[Incorporated by reference from Exhibit
10(iii)(j) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993]
10(iii) (k) Whirlpool Corporation Nonemployee Director Stock
Ownership Plan (as amended February 20, 1996, ef-
fective April 16, 1996) [Incorporated by refer-
ence from Exhibit B to the Company's proxy state-
ment for the 1996 annual meeting of stockholders]
10(iii) (l) Whirlpool 401(k) Plan (as amended and restated
April 1, 1993) [Incorporated by reference from
Exhibit 10(iii)(l) to the Company's Annual Report
on Form 10-K for the fiscal year ended December
31, 1993]
10(iii) (m) Whirlpool Performance Excellence Plan (as amended
January 1, 1992 and February 15, 1994) [Incorpo-
rated by reference from Exhibit 10(iii)(m) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1993]
10(iii) (n) Whirlpool Corporation Executive Deferred Savings
Plan (as amended effective January 1, 1992) [In-
corporated by reference from Exhibit 10(iii)(n)
to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993]
10(iii) (o) Whirlpool Corporation Executive Officer Bonus
Plan (Effective as of January 1, 1994) [Incorpo-
rated by reference from Exhibit 10(iii)(o) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1994]
10(iii) (p) Whirlpool Corporation Charitable Award Contribu-
tion and Additional Life Insurance Plan for Di-
rectors (Effective April 20, 1993) [Incorporated
by reference from Exhibit 10(iii)(p) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1994]
10(iii) (q) Whirlpool Corporation Career Stock Grant Program
(Pursuant to the 1989 Whirlpool Corporation Omni-
bus Stock and Incentive Plan) [Incorporated by
reference from Exhibit 10(iii)(q) to the
Company's Annual Report on Form 10-K for the fis-
cal year ended December 31, 1995]
10(iii) (r) Whirlpool Corporation 1996 Omnibus Stock and In-
centive Plan (Effective April 25, 1996) [Incorpo-
rated by reference from Exhibit A to the
Company's proxy statement for the 1996 annual
meeting of stockholders]
11 Statement Re: Computation of Earnings per share
12 Statement Re: Computation of the Ratios of Earn-
ings to Fixed Charges
13 Management's Discussion and Analysis and Consoli-
dated Financial Statements contained in Annual
Report to Stockholders for the year ended Decem-
ber 31, 1997
21 List of Subsidiaries
23(ii) (a) Consent of Ernst & Young
23(ii) (b) Consent of Price Waterhouse
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
- --------
* This information appears only in the manually signed originals of the Form
10-K and conformed copies with exhibits.
E-2
<PAGE>
B Y - L A W S
O F
W H I R L P O O L C O R P O R A T I O N
(As Amended February 17, 1998)
ARTICLE I
---------
OFFICES
SECTION 1. Registered Office. The registered office of Whirlpool Corporation
(the "Corporation") shall be in the City of Wilmington, County of New Castle,
State of Delaware, and the name of the registered agent in charge thereof is
The Corporation Trust Company.
SECTION 2. Additional Offices. The Corporation may also have offices at such
other places within or without the State of Delaware as the board of directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Holding Meetings. The annual meeting of stockholders for
the election of directors shall be held at such place, within or without the
State of Delaware, as may from time to time be fixed by the board of directors.
Subject to the provisions of Section 4 of this Article II, each meeting of
stockholders for any other purpose may be held at such place, within or without
the State of Delaware, as shall be fixed by the board of directors.
SECTION 2. Annual Meetings; Election of Directors. The annual meeting of
stockholders for the election of directors shall be held on the third Tuesday in
April, or such other date and time as may be determined by the board of
directors. Any other proper business may also be transacted at the annual
meeting.
SECTION 3. Stockholders' List. At least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder,
shall be prepared by or for the Secretary. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, at the place where the meeting is to be held,
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<PAGE>
and shall be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 4. Special Meetings. Special meetings of the stockholders for any
purpose or purposes, except as otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chairman of the Board, any
Vice Chairman, or the President and shall be called by the Chairman of the
Board, any Vice Chairman, or the President or the Secretary at the request in
writing of a majority of the directors in office or pursuant to a resolution
adopted by the board of directors. Such request or resolution shall state the
place, date and hour and the purpose or purposes of the proposed meeting. No
business shall be transacted at any special meeting except that referred to in
the notice thereof.
SECTION 5. Notice of Meetings. A written or printed notice stating the place,
date and hour of the meeting and, in case of a special meeting or whenever
required by statute, by the certificate of incorporation, or by these by-laws,
further stating the purpose or purposes for which the meeting is called, shall
be given by the Secretary to each stockholder entitled to vote thereat by
delivering such notice to him personally or by mailing it, postage prepaid,
addressed to him at his address as it appears on statute, such notice shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting. An affidavit of the Secretary or an Assistant Secretary or of a
transfer agent of the Corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
SECTION 6. Quorum. The holders of at least fifty percent (50%) of the capital
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or the certificate of incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
then the holders of a majority of the shares of capital stock present in person
or represented by proxy and entitled to vote thereat shall have power to adjourn
the meeting from time to time, without notice or call other than by announcement
at the meeting of the time and place of the holding of the adjourned meeting,
until a quorum shall be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally called.
SECTION 7. Voting. When a quorum is present at any meeting, any question
properly brought before such meeting shall be decided by the vote of the holders
of a majority of the voting power of the stock present in person or represented
by proxy and entitled to vote thereon, unless the question is one upon which a
different vote is required by provision of statute, the certificate of
incorporation or these by-laws, in which case such provision shall govern and
control the decision of such question.
Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may, by an
instrument in writing subscribed by such stockholder, authorize another person
or persons to act for such stockholder by proxy, but no such
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<PAGE>
proxy instrument shall be voted or acted upon after three years from its date
unless such instrument provides for a longer period.
SECTION 8. Inspectors of Election. At any election of directors, the chairman
of the meeting may, and upon request of the holders of ten percent (10%) or more
of the stock present and entitled to vote at such election shall, appoint two
inspectors of election who shall subscribe an oath or affirmation to execute
faithfully the duties of inspectors at such election with strict impartiality
and according to the best of their ability and who shall canvass the votes and
make and sign a certificate of the result thereof. No candidate for the office
of director shall be appointed as such inspector.
SECTION 9. Conduct of Stockholders' Meetings. The meetings of the stockholders
shall be presided over by the Chairman of the Board, or if he is not present, by
a Vice Chairman or the President, or if none of such officers is present, by a
Vice President designated by the board of directors, or if none of such officers
is present, by a chairman to be elected at the meeting. The Secretary of the
Corporation, if present, shall act as secretary of such meetings or, if he is
not present, an Assistant Secretary designated by the chairman of the meeting
shall so act; if neither the Secretary nor an Assistant Secretary is present,
then a secretary shall be appointed by the chairman of the meeting. The order
of business shall be as determined by the chairman of the meeting.
SECTION 10. Validity of Proxies; Ballots, etc. At every meeting of the
stockholders, all proxies shall be received and taken charge of and all ballots
shall be received and canvassed by the secretary of the meeting, who shall
decide all questions touching the qualification of voters, the validity of the
proxies, and the acceptance or rejection of votes, unless inspectors of election
shall have been appointed by the chairman of the meeting, in which event such
inspectors of election shall decide all such questions.
SECTION 11. Nominations and Qualifications of Directors. Subject to the rights
of holders of Preferred Stock, nominations for the election of directors may be
made by the board of directors or a stockholder entitled to vote generally in
the election of directors. For a nomination or nominations to be properly made
by any stockholder entitled to vote generally in the election of directors,
written notice of such stockholder's intent to make such nomination or
nominations must be given, either by personal delivery or by registered or
certified United States mail, postage prepaid, to the Secretary of the
Corporation (and must be received by the Secretary) not later than (i) with
respect to an election to be had at an annual meeting of stockholders to be held
on the third Tuesday in April, ninety (90) days in advance of such meeting, and
(ii) with respect to an election to be had at an annual meeting to be held on a
day other than the third Tuesday in April or to be held at a special meeting of
stockholders for the election of directors, the close of business on the seventh
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the
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<PAGE>
nomination or nominations are to be made by the stockholders; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the then current
proxy rules of the Securities and Exchange Commission, if the nominee were to be
nominated by the Board; and (e) the consent of each nominee to serve as a
director of the Corporation if so elected. The chairman of the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
SECTION 12. Advance Notice of Stockholder Proposals. Subject to the rights of
holders of Preferred Stock, at an annual meeting of stockholders, only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been brought before the annual meeting by the board of directors or
by any stockholder of the Corporation entitled to vote generally in the election
of directors who complies with the requirements of this Section 12 and as shall
otherwise be proper subjects for stockholder action and shall be properly
introduced at the meeting. For a proposal or proposals to be properly brought
before an annual meeting by any stockholder entitled to vote generally in the
election of directors, written notice of such stockholder's intent to make such
proposal or proposals must be given, either by personal delivery or by
registered or certified United States mail, postage prepaid, to the Secretary of
the Corporation (and must be received by the Secretary) not later than (i) with
respect to an annual meeting of stockholders to be held on the third Tuesday in
April, ninety (90) days in advance of such meeting, and (ii) with respect to an
annual meeting to be held on a day other than the third Tuesday in April, the
close of business on the seventh day following the date on which notice of such
meeting is first given to stockholders. A stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting: (a) a description of the proposal desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting; (b) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business and any other stockholders known by such
stockholder to be supporting such proposal; (c) the class and number of shares
of the Corporation's stock which are beneficially owned by the stockholder on
the date of such notice; and (d) any financial interest of the stockholder in
such proposal. The chairman of the meeting shall determine whether the
requirements of this Section 12 have been met with respect to any stockholder
proposal. If the chairman of the meeting determines that a stockholder proposal
was not made in accordance with the terms of this Section 12, he or she shall so
declare at the meeting and any such proposal shall not be acted upon at the
meeting.
At a special meeting of stockholders, only such business shall be acted upon as
shall have been set forth in the notice relating to the meeting or as shall
constitute matters incident to the conduct of the meeting as the chairman of the
meeting shall determine to be appropriate.
ARTICLE III
-----------
DIRECTORS
-4-
<PAGE>
SECTION 1. General Powers. The property and business of the Corporation shall
be managed by its board of directors, which shall possess all the powers of the
Corporation except as may be otherwise provided by statute or by the certificate
of incorporation or by these by-laws.
The board of directors may hold its meetings, establish corporate offices and
agencies, and keep the books and records of the Corporation at such places
either within or without the State of Delaware as it may from time to time
determine.
SECTION 2. Election of Directors; Terms of Office. At all meetings of the
stockholders for the election of directors at which a quorum is present, the
persons who were nominated in accordance with Section 11 of Article II of these
by-laws and receive the greatest number of votes shall be elected as directors.
Commencing at the annual meeting of stockholders held in 1986, the board of
directors shall be divided into three classes, and shall have terms of office,
as provided in Article FIFTH of the Certificate.
SECTION 3. Regular Meetings. An annual meeting of the board of directors may
be held immediately after and at the same place as the annual meeting of
stockholders and no notice of such meetings shall be necessary if a quorum be
present, or the time and place of such meeting may instead be fixed by action of
the board of directors and notice of the meeting given pursuant to Section 5 of
this Article III. Such annual meeting shall constitute a regular meeting of the
board of directors. Other regular meetings of the board of directors (so
designated in the resolution fixing the dates thereof) may be held either within
or without the State of Delaware on such dates as may be fixed from time to time
by resolution of the board.
SECTION 4. Special Meetings. Special meetings of the board of directors may be
called by the Chairman of the Board, any Vice Chairman, or the President and
shall be called by the Chairman of the Board, any Vice Chairman, or the
President or Secretary at the request in writing of a majority of the directors
in office, and the person or persons so calling or requesting the calling of any
special meeting of the board of directors shall in such call or request fix the
date, hour and place, within or without the State of Delaware, for holding any
such special meeting.
SECTION 5. Notice of Meetings. Notice of any meeting of the board of directors
(except where no notice is required under Section 3 of this Article III) shall
be given to each director by mail on or before the second day (excluding Sundays
and legal holidays) next preceding the day of the meeting or by telegraph,
cable, telecopier or telex, or personally in writing, on or before the first day
next preceding the day of the meeting.
SECTION 6. Number of Directors. The number of directors which shall constitute
the whole board of directors of the Corporation shall be not less than seven nor
more than fifteen; provided that at all times a majority of the directors shall
be persons who are not employed by the Corporation or any of its subsidiaries
unless a proviso is waived by a majority of directors who are not so employed
present at a meeting at which it is determined that such waiver is in the best
interest of the Corporation. Within such limits the number of directors shall
be as fixed at any meeting of the board of directors by resolution adopted by a
majority of the directors then in office; provided, however, that no decrease in
the number of directors constituting the whole board shall
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<PAGE>
shorten the term of any incumbent director. Vacancies created by an increase in
the number of directors may be filled as provided in Section 10 of this Article
III.
SECTION 7. Quorum. The presence at any meeting of the board of directors of a
majority of the number of directors then in office shall constitute a quorum for
the transaction of business except as otherwise provided in Section 10 of this
Article III.
SECTION 8. Voting. The vote of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the board of directors
unless by provision of statute, the certificate of incorporation or these by-
laws the vote of a different number of directors is required, in which case such
provision shall govern.
SECTION 9. Resignation. Any director or member of a committee of directors may
resign at any time. Such resignation shall be made in writing, and shall take
effect at the time specified therein, and if no time be specified, at the time
of its receipt by the Chairman of the Board, any Vice Chairman, President or
Secretary. Except as hereinafter provided, the acceptance of a resignation shall
not be necessary to make it effective. When there is a change in the principal
occupation of a director from that in which he or she was engaged when elected
to the board, such director shall promptly give notice of the change and submit
a resignation from the board and all committees for consideration by the
Chairman. The Chairman, with the approval of the full board, may elect to
accept or reject such resignation. Directors who are full-time employees of the
Corporation or one of its subsidiaries must promptly resign from the board and
all committees whenever their term of employment ends for any reason, including
but not limited to retirement; the effective date of such resignation to be not
later than the last day of employment. The requirement that a director submit a
resignation due to a change in occupation or due to the termination of
employment with the Corporation or one of its subsidiaries may be waived by a
majority of all other directors present at a meeting of directors at which it is
determined that such waiver is in the best interest of the Corporation.
SECTION 10. Filling of Vacancies. Subject to the rights of holders of
Preferred Stock, in the event of a vacancy in the board of directors or any
newly created directorship resulting from any increase in the number of
directors or any vacancy in any committee of directors, a majority of the
directors, excluding any directors who shall theretofore have resigned effective
as of a future date, may, although less than a quorum, appoint any person to
fill such vacancy upon the occurrence thereof (such person to hold office for
the unexpired term of such office), or to fill such newly created directorship
(such person to serve for the term for the class of directors of which such
director is a member), and until such director's successor shall have been
elected or qualified or until such director's earlier death, resignation, or
removal from office.
SECTION 11. Ratification by Stockholders. Any contract, transaction or act of
the Corporation or of the board of directors or of any committee thereof or of
any officer of the Corporation which shall be ratified at any annual meeting of
stockholders or at any special meeting thereof called for such purpose by the
holders of a majority of the voting power of the then outstanding stock of the
Corporation shall be as valid and binding upon the Corporation and all of its
stockholders as though ratified by every stockholder of the Corporation.
-6-
<PAGE>
SECTION 12. Compensation of Directors. Directors and members of any committee
of directors, other than those who shall be officers or employees of the
Corporation or of a subsidiary thereof, shall be entitled to receive for their
services as such directors or members either an annual fee or a fixed fee, or
both, for attendance at meetings of the board or such committee, in such amounts
as may be provided from time to time by resolution of the board, in addition to
which directors and committee members shall be entitled to receive reimbursement
for their expenses of attendance at meetings of the board or such committee;
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
----------
COMMITTEES
SECTION 1. Appointment; Powers. The board of directors by resolution adopted
by a majority of the whole board, may, (by provision of these by-laws or
otherwise) designate one or more committees of the board, each committee to
consist of such number of directors, in no event less than two, and to have such
powers of affairs of the Corporation as the board may determine and specify in
such a resolution. The board of directors may at any time, by resolution
similarly adopted, change the number, members or powers of any such committee,
fill vacancies, or discharge any such committee.
SECTION 2. Procedures; Meetings; Quorum. To the extent any such action is not
taken by the board of directors, each committee may choose its own chairman and
secretary, fix its own rules of procedure, and meet at such times and at such
place or places as may be provided by such rules. At every meeting of each
committee, the presence of a majority of all the members thereof shall be
necessary to constitute a quorum and the affirmative vote of a majority of the
members present shall be necessary to decide any question before the committee.
SECTION 3. Human Resources Committee. The Human Resources Committee shall
consist of such directors of the Corporation who are not officers or employees
of the Corporation or of any subsidiary as shall be appointed from time to time
by the board of directors. The Human Resources Committee shall make
determinations and awards pursuant to any bonus or incentive plans of the
Corporation, determine salaries to be paid to officers of the Corporation, the
terms and conditions of their employment, the allotment of shares to officers
and other employees under any stock option plan of the Corporation, and shall
also make such other determinations as the Committee deems proper relating to
remuneration or benefits to be paid to officers of the Corporation. At each
meeting of the board of directors a report shall be made to the board respecting
such determinations made by the Committee subsequent to the next preceding
meeting of the board, and each such determination so made and reported shall be
final unless, at said meeting, the same shall be revoked or modified by action
of the board. In addition, the Chairman of the Board shall review with the
Committee from time to time plans for the development, training and utilization
of the management resources of the Corporation. On such occasions, the Human
Resources Committee
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<PAGE>
shall act in an advisory capacity to the Chief Executive Officer in respect of
the foregoing. The Human Resources Committee shall have and perform such other
and additional duties as from time to time may be prescribed by the board of
directors.
SECTION 4. Finance Committee. The Finance Committee shall consist of such
directors of the Corporation, a majority of whom are not officers or employees
of the Corporation or of any subsidiary, as shall be appointed from time to time
by the board of directors. The Finance Committee shall consider and make
recommendations to the board of directors as to such financial matters
concerning the Corporation as shall be referred to it by the board of directors,
or the Chairman of the Board, or which the Committee may consider on its own
initiative, and perform such additional duties as from time to time may be
prescribed by the board of directors.
SECTION 5. Audit Committee. The Audit Committee shall consist of at least
three (3) but not more than five (5) directors of the Corporation, who are not
officers or employees of the Corporation or of any subsidiary, as shall be
appointed from time to time by the board of directors. The Audit Committee
shall (i) consider and make recommendations to the board of directors as to such
auditing matters concerning the Corporation as shall be referred to it by the
board of directors, or the Chairman of the Board, or which the Committee may
consider on its own initiative; (ii) each year recommend to the board of
directors, for appointment by the board, independent auditors of the Corporation
and its wholly-owned subsidiaries, respectively, for such year, to audit the
financial statements of the Corporation and such subsidiaries, and to perform
such other duties as the board may prescribe; (iii) have authority, to the
extent considered desirable by the Committee, to examine into and make
recommendations to the board of directors in respect of (a) the general scope
and results of the audit conducted by the independent auditors; (b) the internal
controls, systems and processes maintained by the Corporation to protect assets
and manage risks; (c) legal, regulatory, compliance or similar matters that may
have a material impact on the Corporation's financial position, and (d) the
appointment, replacement, reassignment or dismissal of the director of internal
audit; and (iv) perform such additional duties as from time to time may be
prescribed by the board of directors. The Audit Committee shall have the power
to conduct or authorize investigations into any matters within the Committee's
scope of responsibilities and, in connection therewith, may retain independent
counsel, accountants or others to assist it.
SECTION 6. Corporate Governance Committee. The Corporate Governance Committee
shall consist of at least three (3) but not more than five (5) directors of the
Corporation who are not officers or employees of the Corporation or of any
subsidiary, as shall be appointed from time to time by the board of directors.
The Corporate Governance Committee shall (i) in consultation with the Chairman
of the Board, consider and make recommendations to the full board of directors
concerning the number and accountability of board committees, committee
assignments and committee membership rotation practices, (ii) establish
qualifications, desired backgrounds and selection criteria for nominees to the
board of directors, (iii) recommend to the full board of directors nominees for
board membership, (iv) on an annual basis, conduct an evaluation of the
effectiveness of the full board of directors (but not of individual members) and
the effectiveness of overall governance practrices and guidelines, based on
input from all board members, and (v) perform such additional duties as from
time to time may be prescribed by the board of directors.
-8-
<PAGE>
ARTICLE V
---------
OFFICERS
SECTION 1. Officers. The officers of the Corporation shall be a Chairman of
the Board, one or more Vice Chairmen, a President, one or more Vice Presidents,
a Treasurer, a Controller, and a Secretary, all of whom shall be elected by the
board of directors. Any two or more offices, except those of President and
Secretary, may be held by the same person. In addition, the Chairman of the
Board may designate as Vice Presidents any number of individuals responsible for
major operations or functions of the Corporation. Each such Vice President
designated as a Senior Officer or member of the Chairman's Council, as evidenced
by a listing maintained by the Corporate Secretary, shall have all the authority
with respect to such individual's area of responsibility as is conferred upon a
Vice President elected by the board of directors.
The board of directors may appoint one or more Assistant Treasurers, one or more
Assistant Controllers, one or more Assistant Secretaries, and such other
assistant officers as the board may deem necessary, who shall have such
authority and shall perform such duties as from time to time may be prescribed
by the board of directors.
Subject to Section 9 of this Article V, each officer and assistant officer
elected or appointed by the board of directors or designated by the Chairman
shall hold office until the next annual meeting of the board of directors and
until his successor shall be chosen.
SECTION 2. The Chairman of the Board. The Chairman of the Board shall be a
director. If so designated by the board of directors, he shall be the chief
executive officer of the Corporation and shall have general direction over the
affairs of the Corporation, subject to the control and direction of the board of
directors. He shall, when present, preside as chairman at all meetings of the
stockholders and of the board of directors. He may call meetings of the board
of directors whenever he deems it advisable. In the absence or incapacity of
the President to act, he shall perform all duties and functions and exercise all
the powers of the President. Unless otherwise provided by the board of
directors, he may execute and deliver bonds, notes, contracts, agreements or
other obligations or instruments in the name of the Corporation, and with the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
may execute and deliver all certificates for shares of the capital stock or
other securities of the Corporation and any warrants evidencing the right to
subscribe to shares of the capital stock of the Corporation. The Chairman of
the Board shall have such other powers and perform such other duties as from
time to time may be assigned to him by the board of directors.
SECTION 3. Vice Chairman. Each Vice Chairman shall be a director. He shall
have such powers and shall perform such duties as may be assigned to him by the
board of directors or by the Chairman of the Board, or elsewhere in these by-
laws.
SECTION 4. The President. The President shall be a director. If so designated
by the board of directors, he shall be the chief executive officer of the
Corporation and shall have general direc-
-9-
<PAGE>
tion over the affairs of the Corporation, subject to the control and direction
of the Chairman of the Board and the board of directors. He shall have general
charge, control and supervision over the administration and operations of the
Corporation, subject to the control and direction of the board of directors and
the Chairman of the Board. He shall keep the Chairman of the Board fully
informed concerning the business of the Corporation under his supervision. In
the absence or incapacity of the Chairman of the Board, a Vice Chairman or the
President shall preside at meetings of the stockholders and of the board of
directors and shall perform all duties and functions and exercise all the powers
of the Chairman of the Board. Unless otherwise provided by the board of
directors, the President may execute and deliver bonds, notes, contracts,
agreements or other obligations or instruments in the name of the Corporation,
and with the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary, may execute and deliver all certificates for shares of the
capital stock or other securities of the Corporation and any warrants evidencing
the right to subscribe to shares of the capital stock of the Corporation. In
general, the President shall have and perform all powers and duties incident to
the office of a president of a corporation and such other powers and duties as
from time to time may be assigned to him by the board of directors or the
Chairman of the Board.
SECTION 5. Vice President. In the absence or incapacity of the Chairman of the
Board, any Vice Chairman, or the President, a Vice President designated by the
Chairman of the Board or by the board of directors shall have and perform all
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Each Vice President
shall have such other powers and shall perform such other duties as may be
assigned to him by the board of directors or by the Chairman of the Board, any
Vice Chairman, or the President.
SECTION 6. Treasurer. The Treasurer shall have responsibility for the custody
and safekeeping of all funds and securities of the Corporation; he shall obtain
and maintain appropriate insurance for the benefit of the Corporation; he shall
be responsible for determining credit policies of the Corporation, for
administration of such policies, and collection of monies due the Corporation in
accordance therewith; he may sign with the Chairman of the Board, any Vice
Chairman, or the President any or all certificates for shares of the capital
stock or other securities of the Corporation and any warrants evidencing the
right to subscribe to shares of the capital stock of the Corporation; and in
general he shall have and perform all of the other powers and duties incident to
the office of treasurer and such other powers and duties as may be assigned to
him by the board of directors or the Chairman of the Board, any Vice Chairman,
or the President.
SECTION 7. The Controller. The Controller shall be the chief accounting
officer of the Corporation, shall maintain adequate records of its assets,
liabilities and transactions, shall see that adequate audits thereof are
currently and regularly made, and shall be in charge of its books of account
and its accounting and financial statements and records, operating reports,
budgets, statistics, and estimates and projections. He shall be responsible for
the development and maintenance of inventory control records and the taking and
costing of physical inventories; for the initiation, preparation and issuance of
standard practices relating to all accounting matters and procedures, and the
coordination of accounting systems throughout the Corporation and its
subsidiaries; and for the analysis and interpretation of significant data to
develop trends and cost comparisons, which shall be made available to the
Corporation's management together with his
-10-
<PAGE>
conclusions therefrom. He shall maintain adequate records of authorized
appropriations and determine that all sums expended pursuant thereto are
accounted for, and shall be responsible for the preparation and filing of tax
returns and all matters relating to taxes. The Controller shall have such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or the Chairman of the Board, any Vice Chairman, or
the President.
SECTION 8. The Secretary. The Secretary shall keep or cause to be kept the
minutes of all meetings of the stockholders and of the board of directors; shall
see that all notices are duly given in accordance with the provisions of these
by-laws and as required by law; shall be custodian of the minute books, stock
ledger, and similar corporate records and of the seal of the Corporation and see
that the seal is affixed to all documents the execution and delivery of which on
behalf of the Corporation under its seal are duly authorized in accordance with
the provisions of these by-laws; shall keep or cause to be kept a stock ledger
of the Corporation containing a complete list of stockholders, the post office
address of each stockholder, and the number of shares registered in the name of
each stockholder; may sign with the Chairman of the Board, any Vice Chairman, or
the President any and all certificates for shares of the capital stock or other
securities of the Corporation and any warrants evidencing the right to subscribe
to shares of the capital stock of the Corporation; and in general the Secretary
shall have and perform all powers and duties incident to the office of the
secretary and such other powers and duties as may, from time to time, be
assigned to him by the board of directors or the Chairman of the Board, any Vice
Chairman, or the President.
SECTION 9. Removal of Officers. Any officer elected or appointed by the board
of directors may be removed, either with or without cause, by the vote of a
majority of the directors then in office at any meeting of the board of
directors. Any Vice President designated by the Chairman of the Board may be
removed, either with or without cause, by written designation from the Chairman
delivered to the Corporate Secretary.
SECTION 10. Filling of Vacancies. If a vacancy shall exist in the office of
any officer or assistant officer of the Corporation, the board of directors may
elect or appoint any person to fill such vacancy, such person to hold office
(subject to Section 9 of this Article V) until the next annual meeting of the
board of directors and until his successor shall be chosen and qualified.
ARTICLE VI
----------
CAPITAL STOCK
SECTION 1. Transfer of Shares. The shares of stock of the Corporation shall be
transferable only upon its books by the holders thereof in person or by their
duly authorized attorneys or legal representatives or pursuant to the unclaimed
property laws of the various states and upon such transfer the old certificates
shall be surrendered to the Corporation by the delivery thereof to the Secretary
or the transfer agent for said shares of stock, or to such other person as the
board of directors may designate, by whom such old certificates shall be
cancelled, and new certificates shall thereupon be issued. A record shall be
made of each transfer.
-11-
<PAGE>
SECTION 2. Lost or Destroyed Certificates. The board of directors may
determine the conditions upon which a new certificate of stock may be issued in
place of a certificate which is alleged to have been lost, stolen or destroyed;
and may, in the board's discretion, require the owner of such certificate or his
legal representative to give bond, with such surety, if any, as the board shall
deem appropriate, sufficient to indemnify the Corporation and each transfer
agent and registrar, against any claim which may arise by reason of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate.
SECTION 3. Unclaimed Property Laws. The officers of the Corporation who are
authorized to issue or cause the issuance of duplicate stock certificates
pursuant to Section 2 of this Article VI are hereby authorized to issue or cause
the issuance of duplicate stock certificates, without cancellation of the
original certificates, as may be required in respect of compliance with the
unclaimed property laws of any state.
ARTICLE VII
-----------
CORPORATE SEAL
The board of directors shall authorize and establish a corporate seal containing
the name of the Corporation, the words "Corporate Seal" and "Delaware", and
otherwise in such form as shall be approved by the board of directors.
ARTICLE VIII
------------
MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
SECTION 2. Notice. Any notice required, (i) if given by mail, shall be deemed
to have been given upon the deposit thereof in a post office box, postage
prepaid, or (ii) if given by telegraph or cable, shall be deemed to have been
given upon delivery thereof to the telegraph or cable company for transmission,
or (iii) if the person entitled to notice has facilities for the receipt of
telecopies or telex, shall be deemed to have been given upon transmission of the
notice by such means; and in any instance the notice shall be addressed to the
person entitled thereto at such person's last known address according to the
records of the Corporation.
SECTION 3. Voting Upon Stocks. Unless otherwise ordered by the board of
directors, the Chairman of the Board, any Vice Chairman, or the President shall
have full power and authority in behalf of the Corporation to attend and to act
and to vote at any meeting of stockholders of any corporation in which the
Corporation may hold stock, and also to execute and deliver for and on behalf of
the Corporation proxies in respect of such meetings, and at any such meeting the
Chairman of the Board, any Vice Chairman, or the President or the individual or
individuals named
-12-
<PAGE>
in the proxy executed by the Chairman of the Board, any Vice Chairman, or the
President in respect of such meeting shall possess and may exercise any and all
the rights and powers incident to the ownership of such stock and which, as the
owner thereof, the Corporation might have possessed and exercised if present.
The board of directors, by resolution, from time to time may confer like powers
upon any other person or persons, which powers may be general or confined to
specific instances.
SECTION 4. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the board of directors or of any committee thereof may
be taken without a meeting if all members of the board or such committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceeding of the board or committee.
ARTICLE IX
----------
AMENDMENTS
The board of directors shall have full power to alter, amend or repeal these by-
laws or any provision thereof, or to adopt new by-laws, at any regular meeting
as part of the general business of such meeting, or at a special meeting called
for the purpose. By-laws adopted, altered or amended by the board of directors
may be altered, amended or repealed by the stockholders. Notwithstanding the
preceding sentence, and subject to the rights of holders of Preferred Stock, any
action of the stockholders to adopt, amend, alter or repeal the by-laws shall
require the affirmative vote of at least eighty percent (80%) of the holders of
common stock of the Corporation.
* * * * * * * * *
-13-
<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(ALL AMOUNTS IN MILLIONS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Basic:
Average Shares Outstanding............................. 74.7 74.3 73.9
Earnings (Loss):
Continuing Operations................................ $(46.4) $140.9 $195.5
Discontinued Operations.............................. 31.6 14.9 13.9
------ ------ ------
Net Earnings (Loss).................................... $(14.8) $155.8 $209.4
====== ====== ======
Earnings (Loss) Per Share from Continuing Operations... $(0.62) $ 1.90 $ 2.64
Net Earnings (Loss) Per Share.......................... $(0.20) $ 2.10 $ 2.83
====== ====== ======
Diluted:
Average Shares Outstanding............................. 74.7 74.3 73.9
Treasury Stock Method (a):
Stock Options........................................ -- 0.7 0.7
Assumed Conversion of Debt............................. -- 2.2 2.2
------ ------ ------
Average Shares Outstanding............................... 74.7 77.2 76.8
====== ====== ======
Earnings (Loss) from Continuing Operations............. $(46.4) $140.9 $195.5
Interest Expense, net of tax........................... -- 4.5 4.2
------ ------ ------
Diluted Earnings (Loss) from Continuing Operations..... $(46.4) $145.4 $199.7
====== ====== ======
Diluted Earnings (Loss) Per Share from Continuing
Opeations............................................. $(0.62) $ 1.88 $ 2.60
====== ====== ======
Net Earnings (Loss).................................... $(14.8) $155.8 $209.4
Interest Expense, net of tax........................... -- 4.5 4.2
------ ------ ------
Diluted Net Earnings (Loss)............................ $(14.8) $160.3 $213.6
====== ====== ======
Diluted Net Earnings (Loss) Per Share.................. $(0.20) $ 2.08 $ 2.78
====== ====== ======
</TABLE>
- --------
(a) Using the average market price per share of stock for the period; effect
of stock options precipitates an anti-dilutive calculation in 1997, and
therefore not included; convertible debt retired in 1997.
<PAGE>
EXHIBIT 12--RATIO OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------
APPLIANCE FINANCIAL WHIRLPOOL
BUSINESS SERVICES CORPORATION
--------- --------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Pretax earnings................................ $(171) $(7) $ (178)
Portion of rents representative of the interest
factor........................................ 20 1 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
Adjusted income................................ $ 17 $77 $ 94
===== === ======
<CAPTION>
FIXED CHARGES
- -------------
<S> <C> <C> <C>
Portion of rents representative of the interest
factor........................................ $ 20 $ 1 $ 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
$ 188 $84 $ 272
===== === ======
Ratio of earnings to fixed charges............. 0.1 0.9 0.3
===== === ======
</TABLE>
<PAGE>
EXHIBIT 12 - RATIO OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------
APPLIANCE FINANCIAL WHIRLPOOL
BUSINESS SERVICES CORPORATION
--------- --------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Pretax earnings................................ $(171) $(7) $ (178)
Portion of rents representative of the interest
factor........................................ 20 1 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
Adjusted income................................ $ 17 $77 $ 94
===== === ======
<CAPTION>
FIXED CHARGES
- -------------
<S> <C> <C> <C>
Portion of rents representative of the interest
factor........................................ $ 20 $ 1 $ 21
Interest on indebtedness....................... 167 77 244
Amortization of debt expense and premium....... 1 -- 1
WFC preferred stock dividend................... -- 6 6
----- --- ------
$ 188 $84 $ 272
===== === ======
Ratio of earnings to fixed charges............. 0.1 0.9 0.3
===== === ======
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The consolidated statements of earnings summarize operating results for the last
three years. This section of Management's Discussion and Analysis highlights
the main factors affecting changes in operating results during the three-year
period. The accompanying financial statements include the company's investment
in Whirlpool Financial Corporation (WFC) on a discontinued basis and the
company's investment in its Brazilian subsidiary, Brasmotor S.A., on a
consolidated basis for the last two months of 1997. Prior to the consolidation,
the Brazilian operations were accounted for on an equity basis.
Prior to the fourth quarter of 1997, the company's Brazilian operations were
reported on a one month lag. In the fourth quarter, this one month reporting
lag was eliminated and the Brazilian results for the year ended December 31,
1997 included activity for 13 months. The effect of eliminating the one month
lag increased net earnings $5 million, excluding non-recurring items.
Net Sales
- ---------
Net sales were $8.6 billion in 1997 including two months of sales related to
consolidating Brasmotor, an increase of 1% over 1996. Excluding currency
fluctuations and the consolidation of Brasmotor, net sales were down 1% year-
over-year. North American unit volumes were up 1% over 1996, in an industry
that was up less than 1%. North American sales were down 1% compared to 1996,
due to competitive pricing partially offset by increased volume and favorable
product mix. North American industry shipments are expected to be down slightly
in 1998. European unit volumes were up 4% over 1996 while the industry was up
nearly 4%. European sales were down 6% compared to 1996; however, excluding the
effect of currency fluctuations, sales were up more than 8% year-over-year.
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. European industry shipment growth is expected to be up 2% in 1998.
Net sales were $8.5 billion in 1996, an increase of 4% over 1995. Excluding
currency fluctuations, net sales were up 5% year-over-year due to the impact of
increased volume, partially offset by unfavorable brand and product mix. North
American unit volumes were up 2% over 1995 in an industry that was up nearly 5%.
North American sales were up 4% due to a combination of higher pricing and
volume and improved product mix. European unit volumes were up 11% over 1995
while the industry was down nearly 2%. European sales were up 3% compared to
1995 and were up 5% excluding currency fluctuations. Partially offsetting the
impact of volume increases on sales growth were unfavorable brand and product
mix, as consumer preference continued the trend toward lower-priced brands and
products, without any substantial price increases during the year.
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Expenses
- --------
Gross margin percentage improved by 1% in 1997 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 price deterioration. Price realization combined with improved product mix,
effective cost control management and reduced material costs have improved the
European gross margin percentage 2% compared to the prior year.
Gross margin percentage on product sales deteriorated 1% in 1996 compared to
1995 as the North American margin improvement of 1%, stemming from improved
product mix and higher pricing, was more than offset by a 5% European margin
deterioration. European margins reflect customers shifting to lower margin
brands and products, unfavorable currency fluctuations, delays in achieving cost
targets on new products and stagnant pricing in the marketplace.
Selling and administrative expenses, excluding non-recurring items, as a percent
of net sales were flat in 1997 compared to 1996. The North American and
European percentages were both essentially flat with the prior year.
Selling and administrative expenses as a percent of net sales decreased slightly
in 1996 compared to 1995. The expense percentage in North America decreased
slightly, while the European expense percentage declined 1% in 1996 primarily
due to reduced selling costs and tight control over other spending. Europe also
benefited from cost reductions stemming from restructuring efforts executed
during 1995.
Restructuring costs of $343 million in 1997 were incurred to better align the
company's cost structure within the global home-appliance marketplace. The
restructurings are expected to result in annual savings of about $200 million
when fully implemented by the year 2000. Refer to Note 10 to the accompanying
consolidated financial statements.
Restructuring costs of $30 million in 1996 improved the company's long-term cost
competitiveness and profitability in the North American refrigeration market and
in Asia, with annual cost savings of $37 million when fully implemented. Refer
to Note 10 to the accompanying consolidated financial statements.
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Other Income and Expense
- ------------------------
Interest and sundry expense for 1997, including the Brasmotor consolidation, was
down compared to 1996. Excluding the impact of consolidating Brasmotor, interest
and sundry expense was flat with 1996 and 1995.
Interest expense for 1997 was up compared to 1996 due to the Brasmotor
consolidation. Excluding the impact of consolidating Brasmotor, interest expense
was flat in 1997. Interest expense for 1996 increased significantly from the
prior year due to higher borrowing levels (Refer to Cash Flows - Financing
Activities) and higher interest rates.
Income Taxes
- ------------
The effective tax rate for continuing operations, excluding non-recurring items,
was 44% in 1997 compared to 62% in 1996 and 42% in 1995. The lower effective
tax rate in 1997 compared to 1996 is due to the diminished impact of permanent
items resulting from higher pretax earnings, the impact of consolidating
Brasmotor, as well as certain tax loss benefits. The increase in the provision
in 1996 compared to 1995 is primarily due to higher unbenefited losses in Asia,
the relatively larger impact permanent items had on the effective tax rate due
to lower net earnings, and an unfavorable mix of pretax earnings and losses by
country, partially offset by tax credits relating to prior years.
Earnings/(Loss) from Continuing Operations before Equity Earnings and Other
- ---------------------------------------------------------------------------
Items
- -----
Earnings/(loss) from continuing operations before equity earnings and minority
interests were $(162) million, $30 million and $124 million in 1997, 1996 and
1995. Excluding the impact of non-recurring items, earnings before equity
earnings and minority interests were $129 million, $49 million and $124 million
in 1997, 1996 and 1995.
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Equity in Affiliated Companies
- -------------------------------
Equity earnings were $67 million, $93 million and $72 million in 1997, 1996 and
1995.
The company's Brazilian affiliates contributed 1997 earnings of $78 million
(excluding non-recurring items), $92 million and $70 million in 1996 and 1995.
The 1997 decline reflects a slowdown in the previously robust growth in the
Brazilian appliance industry partially offset by $34 million of Befiex and other
tax benefits for 1997. The Befiex benefit, which is a government export
incentive, is scheduled to expire mid 1998. Results in 1996 and 1995 reflected
significant growth in the Brazil appliance industry. Results in 1995 were also
favorably affected by certain non-recurring tax benefits, including $17 million
of excise tax credits and the consequences of the May 1994 merger of two of the
Brazilian affiliates, Brastemp S.A. and Consul S.A., into a new entity,
Multibras S.A. The merger resulted in operating efficiencies as an outcome of
consolidating selling and administrative functions, improving utilization of
prior year tax losses and more flexibly managing brands and products.
The company's Mexican affiliate equity earnings were $5 million in 1997 compared
to equity losses of $3 million in 1996 and break-even equity earnings in 1995.
This 1997 performance resulted from higher shipment volumes as the appliance
industry was up over 30% and lower financing costs triggered by a refinancing at
the end of the second quarter in 1996. 1996 was down compared to 1995 due
primarily to lower foreign currency exchange gains.
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.
Discontinued Operations
- -----------------------
The discontinued operations results include a pretax charge in 1997 of $36
million (after-tax $22 million) to reduce the carrying value of certain retained
WFC aerospace assets.
Non-Recurring Items and Net Earnings
- ------------------------------------
In 1997, the company recorded the following non-recurring items; an after-tax
restructuring charge of $232 million or $3.07 per diluted share, special
operating charges of $62 million or $.83 per diluted share and gain on business
dispositions of $42 million or $.55 per diluted share.
In 1996, the company recorded an after-tax restructuring charge of $19 million
or $.25 per diluted share.
Absent non-recurring restructuring, operating charges and business dispositions,
net earnings were $238 million, $175 million and $209 million in 1997, 1996 and
1995. Corresponding diluted earnings per share were $3.15, $2.32 and $2.78 in
1997, 1996 and 1995. Corresponding basic earnings per share were $3.18, $2.35
and $2.83 in 1997, 1996 and 1995.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
CASH FLOWS
The statements of cash flows from continuing operations reflect the changes in
cash and equivalents for the last three years 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 provided by operating activities was $593 million, $545 million and $377
million in 1997, 1996 and 1995. The increase in 1997 from the prior year is
primarily due to favorable performance in inventory, accounts payable and other
operating accounts, excluding the impact of the Brasmotor consolidation. The
increase in 1996 from the prior year is primarily due to favorable changes in
working capital and other operating accounts and lower restructuring spending,
partially offset by lower earnings.
Investing Activities
- --------------------
The principal recurring investing activities are property additions. Net
property additions for continuing operations were $378 million, $336 million and
$483 million in 1997, 1996 and 1995. These expenditures were primarily for
equipment and tooling related to product improvements, more efficient production
methods and equipment replacement for normal wear and tear.
In 1997, the company began construction of a new $86 million facility in Pune,
India to manufacture no-frost refrigerators for the South Asia appliance market.
The facility is expected to begin commercial production in the first quarter of
1998.
Refer to Note 2 to the accompanying consolidated financial statements for
discussion of business dispositions and acquisitions during the last three
years.
Financing Activities
- --------------------
Dividends to shareholders totaled $102 million, $101 million and $100 million in
1997, 1996 and 1995.
The company's net borrowings decreased by $1,069 million in 1997, excluding
currency translation and $132 million of borrowings net of cash assumed in
acquisitions, resulting primarily from proceeds related to the WFC asset sales.
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.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The company's net borrowings increased by $171 million in 1996, excluding
currency translation and $25 million of borrowings assumed in acquisitions,
primarily to fund property additions and origination of financing receivables.
The increase included a $244 million issuance of 7 3/4% debentures maturing in
2016.
The company's net borrowings increased by $758 million in 1995, excluding
currency translation and $50 million of borrowings assumed in acquisitions,
primarily to fund property additions, origination of financing receivables and
Asian acquisitions.
FINANCIAL CONDITION AND OTHER MATTERS
The financial position of the company remains strong as evidenced by the
December 31, 1997 balance sheet. The company's total assets are $8.3 billion
and stockholders' equity is $1.8 billion.
The overall debt to invested capital ratio net of cash (debt ratio) of 42.1%
was down from 58.6% in 1996 due to the sale of the WFC financing business and
the consolidation of Brasmotor. The appliance business debt to invested capital
ratio of 38.5% was down from 42.6% in 1996 due to the consolidation of
Brasmotor. The company's debt continues to be rated investment grade by Moody's
Investors Service Inc., Standard and Poor's and Duff & Phelps.
The company is exposed to market risk from changes in foreign currency exchange
rates, domestic and foreign interest rates, and commodity prices, which can
impact its operating results and overall financial condition. The company
manages its exposure to these market risks through its operating and financing
activities and, when deemed appropriate, through the use of derivative financial
instruments. Derivative financial instruments are viewed as risk management
tools and are not used for speculation or for trading purposes. Derivative
financial instruments are entered into with a diversified group of investment
grade counterparties to reduce the company's exposure to nonperformance on such
instruments.
The company manages a portfolio of domestic and cross currency interest rate
swaps which serve to effectively convert U.S. Dollar (USD) denominated debt into
that of various European currencies. Such local currency denominated debt
serves as an effective hedge against the European cash flows and net assets that
exist today and which are generated by the European business over time. (Refer
to Notes 1 and 7 for the accounting treatment for, and a detailed description
of, these instruments.) Domestic and cross-currency interest rate swaps in this
portfolio are sensitive to changes in foreign currency exchange rates and
interest rates. As of December 31, 1997, a ten percent appreciation of the USD
versus the European currencies alone would have resulted in an incremental
unrealized gain on these contracts of $73 million. The converse event would
have resulted in an incremental unrealized loss on these contracts of $86
million. As of December 31, 1997, ten percent favorable shifts in interest
rates alone to each swap would have resulted in an incremental unrealized gain
of $23 million. The converse events would have resulted in an incremental
unrealized loss of $27 million.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The company uses foreign currency forward contracts and options from time to
time to hedge the price risk associated with firmly committed and forecasted
cross-border payments and receipts related to its ongoing business and
operational financing activities. The value of these contracts moves in a
direction opposite to that of the transaction being hedged, thus eliminating the
price risk associated with changes in market prices. Foreign currency contracts
are sensitive to changes in foreign currency exchange rates. At December 31,
1997, ten percent unfavorable exchange rate movements in the company's portfolio
of foreign currency forward contracts would have resulted in an incremental
unrealized loss of $68 million while ten percent favorable shifts would have
resulted in an incremental unrealized gain of $64 million. Consistent with the
use of these contracts, such unrealized losses or gains would be offset by
corresponding gains or losses, respectively, in the remeasurement of the
underlying transactions. The company had no foreign currency options
outstanding at December 31, 1997.
The company manages a portfolio of domestic interest rate swap contracts which
serve to effectively convert long-term, fixed rate USD-denominated debt into
floating rate LIBOR-based debt. The company also uses commodity swap contracts
to hedge the price risk associated with firmly committed and forecasted
commodities purchases which are not hedged by contractual means directly with
suppliers. As of December 31, 1997, a ten percent increase or decrease in
interest rates or copper and zinc prices would not have resulted in a material
gain or loss.
Brasmotor's long term debt carries a floating interest rate which periodically
reprices driving the carrying value to approximate the fair value. As of
December 31, 1997, a ten percent increase or decrease in interest rates would
not have resulted in a material gain or loss.
The company's sensitivity analysis reflects the effects of changes in market
risk but does not factor in potential business risks.
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.
The company has taken actions to understand the nature and extent of the work
required to make its global infrastructure Year 2000 compliant. The company
began work a few years ago to prepare its financial, information and other
computer-based systems for the Year 2000. The company continues to evaluate the
estimated costs associated with these efforts. While these efforts will involve
additional costs, the company believes it will be able to manage its total Year
2000 transition without any material adverse effect on its business operations.
Additionally, in an effort to enhance productivity and business systems
performance, the company has begun the process of investing in the development
of improved global business processes through Enterprise Resource Planning
(ERP). ERP involves the implementation of a commercially-available, enterprise-
wide business software package. The company expects ERP to drive benefits
through improved communications to better integrate manufacturing, finance,
customer management and distribution applications.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS UNIT SALES AND OPERATING PROFIT
The following data is presented as supplemental information:
Net Sales by Business Unit were as follows:
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars) 1997 1996 Increase/(Decrease)
------ ------ -------------------
<S> <C> <C> <C> <C>
North America $5,263 $5,310 $ (47) (1)%
Europe 2,343 2,494 (151) (6)
Asia 400 461 (61) (13)
Latin America 624 268 356 133
Other (13) (10) (3) (30)
------ ------ ----- ---
Total $8,617 $8,523 $ 94 1%
====== ====== ===== ===
</TABLE>
Operating Profit by Business Unit was as follows:
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars) 1997 1996 Increase/(Decrease)
------ ------ -------------------
<S> <C> <C> <C> <C>
North America $ 546 $ 537 $ 9 2%
Europe 54 (13) 67 N/M
Asia (62) (70) 8 11
Latin America 28 12 16 133
Restructuring charge (343) (30) (313) N/M
Special operating charge (53) - (53) N/M
Other (159) (158) (1) (1)
------ ------ ----- ---
Total $ 11 $ 278 $(267) (96)%
====== ====== ===== ===
</TABLE>
For commentary regarding performance in North America, Europe, restructuring
charge and special operating charge refer to "Results of Operations" and Note 10
to the accompanying consolidated financial statements. Latin American sales and
operating profit include the Brazilian operations on a consolidated basis for
the last two months of 1997. "Other" consists of corporate expenses and
eliminations.
The significant increase in Latin American sales and operating profit over 1996
was driven by the consolidation of Brasmotor for the last two months of 1997.
The activities of the Brazilian affiliates for the balance of the year are
included in equity in affiliated companies and discussed in "Results of
Operations."
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 (Befiex). In
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
April 1997, Multibras and Embraco submitted tax-credit claims for about $440
million 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 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.
Sales decreased in Asia versus 1996 due to the economic slowdown affecting much
of the region. Operating profit improved as compared to the prior year as cost
structure initiatives and significantly reduced administrative spending offset
the sales shortfalls. Operating profit is expected to be about break even in
1998 but could be negatively affected by economic conditions in the region.
9
<PAGE>
WHIRLPOOL CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended December 31
(millions of dollars except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net sales $8,617 $8,523 $8,163
EXPENSES
Cost of products sold 6,604 6,623 6,245
Selling and administrative 1,625 1,557 1,521
Intangible amortization 34 35 31
Restructuring costs 343 30 -
------ ------ ------
8,606 8,245 7,797
------ ------ ------
OPERATING PROFIT 11 278 366
OTHER INCOME (EXPENSE)
Interest and sundry (14) (23) (23)
Interest expense (168) (155) (129)
------ ------ ------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND OTHER ITEMS (171) 100 214
Income taxes (benefit) (9) 70 90
------ ------ ------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE EQUITY EARNINGS AND MINORITY INTERESTS (162) 30 124
Equity in affiliated companies 67 93 72
Minority interests 49 18 (1)
------ ------ ------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS (46) 141 195
Earnings (loss) from discontinued operations (less applicable taxes) (11) 15 14
Gain on disposal from discontinued operations (less applicable taxes) 42 - -
------ ------ ------
NET EARNINGS (LOSS) $ (15) $ 156 $ 209
====== ====== ======
Per share of common stock:
Basic Earnings (loss) from continuing operations $(0.62) $ 1.90 $ 2.64
Basic Net earnings (loss) $(0.20) $ 2.10 $ 2.83
====== ====== ======
Diluted Earnings (loss) from continuing operations $(0.62) $ 1.88 $ 2.60
Diluted Net earnings (loss) $(0.20) $ 2.08 $ 2.78
====== ====== ======
Cash dividends $ 1.36 $ 1.36 $ 1.36
====== ====== ======
</TABLE>
See notes to consolidated financial statements
10
<PAGE>
CONSOLIDATED BALANCE SHEETS
WHIRLPOOL CORPORATION
<TABLE>
<CAPTION>
December 31 (million of dollars) 1997 1996
------- -------
ASSETS
Current Assets
- --------------
<S> <C> <C>
Cash and equivalents $ 578 $ 129
Trade receivables, less allowances of
$156 in 1997 and $45 in 1996 1,565 966
Financing receivables and leases,
less allowances - 1,400
Inventories 1,170 1,034
Prepaid expenses and other 191 188
Deferred income taxes 215 95
Net assets of discontinued operations 562 -
------- -------
Total Current Assets 4,281 3,812
Other Assets
- ------------
Investment in affiliated companies 100 513
Financing receivables and leases, less allowances - 705
Intangibles, net 916 870
Deferred income taxes 220 152
Other 378 165
------- -------
1,614 2,405
Property, Plant and Equipment
- -----------------------------
Land 92 93
Buildings 969 731
Machinery and equipment 4,201 3,015
Accumulated depreciation (2,887) (2,041)
------- -------
2,375 1,798
------- -------
Total Assets $ 8,270 $ 8,015
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------ ------
Current Liabilities
- -------------------
Notes payable $1,332 $2,038
Accounts payable 987 983
Employee compensation 265 226
Accrued expenses 858 624
Restructuring costs 212 32
Current maturities of long-term debt 22 119
------ ------
Total Current Liabilities 3,676 4,022
Other Liabilities
- -----------------
Deferred income taxes 190 206
Postemployment benefits 598 563
Other liabilities 188 161
Long-term debt 1,074 955
------ ------
2,050 1,885
Minority Interests 773 182
Stockholders' Equity
- --------------------
Common stock, $1 par value: 250 million shares authorized 82 81
Paid-in capital 280 246
Retained earnings 1,801 1,918
Unearned restricted stock (6) (7)
Cumulative translation adjustments (149) (76)
Treasury stock - 6 million shares at cost in 1997 and 1996 (237) (236)
------ ------
Total Stockholders' Equity 1,771 1,926
------ ------
Total Liabilities and Stockholders' Equity $8,270 $8,015
====== ======
</TABLE>
See notes to consolidated financial statements
11
<PAGE>
WHIRLPOOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
(millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
------ ---- -----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ (15) $156 $ 209
Depreciation 322 318 282
Deferred income taxes (208) (32) 44
Equity in net earnings of affiliated
companies, less dividends received (51) (84) (58)
Gain on business dispositions (70) - -
Provision for doubtful accounts 89 52 43
Amortization of goodwill 34 35 30
Restructuring charges, net of cash paid 267 (42) (119)
Minority interests (49) (18) 1
Changes in assets and liabilities,
net of effects of business
acquisitions and dispositions:
Trade receivables (145) 58 23
Inventories 177 (7) (111)
Accounts payable 20 (21) 70
Other - net 222 130 (37)
----- ---- -----
CASH PROVIDED BY
OPERATING ACTIVITIES $ 593 $545 $ 377
===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
INVESTING ACTIVITIES
Net additions to properties $ (378) $ (336) $ (483)
Net change in financing receivables and leases 706 265 256
Net assets of discontinued operations (562) - -
Acquisitions of businesses,
less cash acquired 179 (27) (157)
Net increase (decrease) in investment in
and advances to affiliated companies 13 15 (40)
Business dispositions 1,038 - 26
Other (8) (32) (25)
-------- -------- --------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES 988 (645) (935)
FINANCING ACTIVITIES
Proceeds of short-term borrowings 31,479 24,911 16,493
Repayments of short-term borrowings (32,439) (24,847) (15,744)
Proceeds of long-term debt 102 316 130
Repayments of long-term debt (211) (209) (121)
Repayments of non-recourse debt (8) (13) (10)
Dividends (102) (101) (100)
Purchase of treasury stock - - (35)
Proceeds from the sale of preferred stock - 25 -
Other 47 (2) 22
-------- -------- --------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES (1,132) 80 635
-------- -------- --------
INCREASE (DECREASE) IN
CASH AND EQUIVALENTS 449 (20) 77
Cash and equivalents at beginning of year 129 149 72
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR $ 578 $ 129 $ 149
======== ======== ========
</TABLE>
See notes to consolidated financial statements
12
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Nature of Operations: Whirlpool Corporation is the world's leading manufacturer
and marketer of major home appliances. The company manufactures in 13 countries
on five continents and markets products to distributors and retailers in about
140 countries.
Principles of Consolidation: The consolidated financial statements include all
majority-owned subsidiaries. Investments in affiliated companies are accounted
for by the equity method. All intercompany transactions have been eliminated
upon consolidation.
In November 1997, the company increased its voting ownership in its Brazilian
affiliate, Brasmotor S.A., from 33% to 66% (Refer to Note 2). As a result, the
Brazilian operations are consolidated as of November 1, 1997. Prior to that
date, the Brazilian operations were accounted for on an equity basis.
Discontinued Operations: In the third quarter 1997, the company discontinued its
financial services business; as a result, prior year amounts on the statement of
earnings have been restated to reflect this business as a discontinued
operation. Balance sheet and cash flow amounts would not have been materially
different and have not been restated.
Use of Estimates: Management is required to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Revenue Recognition: Sales are recorded when product is shipped to distributors
or directly to retailers.
Cash and Equivalents: All highly liquid debt instruments purchased with a
maturity of three months or less are considered cash equivalents.
Inventories: Inventories are stated at first-in, first-out (FIFO) cost, except
U.S. production inventories which are stated at last-in, first-out (LIFO) cost
and Brazilian inventories which are stated at average cost. Costs do not exceed
realizable values.
Property, Plant and Equipment: Property, plant and equipment are stated at cost.
Depreciation of plant and equipment is computed using the straight-line method
based on the estimated useful lives of the assets.
Intangibles: The cost of business acquisitions in excess of net tangible assets
acquired is amortized on a straight-line basis principally over 40 years. Non-
compete agreements are amortized on a straight-line basis over the terms of the
agreements. Accumulated amortization totaled $211 million and $191 million at
December 31, 1997 and 1996. Should circumstances indicate the potential
impairment of goodwill, the company would compare the carrying amount against
related estimated undiscounted future cash flows to determine if a write-down to
market value or discounted cash flow value is required.
Research and Development Costs: Research and development costs are charged to
expense as incurred. Such costs were $181 million, $197 million and $180 million
in 1997, 1996 and 1995.
Advertising Costs: Advertising costs are charged to expense as incurred. Such
costs from continuing operations were $155 million, $142 million and $148
million in 1997, 1996 and 1995.
-13-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency Translation: The functional currency for the company's
international subsidiaries and affiliates is the local currency except for
selected Latin American subsidiaries (including Brazil) which have been
considered hyperinflationary and have been remeasured to U.S. dollars. Effective
January 1, 1998, Brazil is no longer considered to be hyperinflationary and the
local currency will be considered the functional currency.
-14-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF PRINCIPAL ACCOUNTING POLICIES--CONTINUED
Derivative Financial Instruments: The company uses derivative financial
instruments to manage the economic impact of fluctuations in interest rates,
foreign currency exchange rate and commodity prices. To achieve this, the
company enters into interest rate and cross currency interest rate swaps,
foreign currency, forward contracts and options, and commodity swaps.
The company's hedging strategy for the foreign currency exchange risk associated
with its investment in Europe is based on projected foreign currency cash flows
over periods up to ten years. The company uses interest rate and cross currency
interest rate swaps to effectively convert a portion of the company's U.S.
dollar denominated debt into various European currencies. The company's
investment in Europe and the foreign currency portion of these cross currency
interest rate swaps are revalued in dollar terms each period to reflect current
foreign currency exchange rates with gains and losses recorded in the equity
section of the balance sheet. To the extent that the notional amounts of these
contracts exceed the company's investment in Europe, the related mark-to-market
gains and losses are reflected currently in earnings. The net translation loss
recognized in other income, including the gains and losses from those contracts
not qualifying as hedges, was $8 million, $14 million and $16 million in 1997,
1996 and 1995. The amounts receivable from or payable to counterparties to the
swaps, offsetting the gains and losses recorded in equity or earnings, are
recorded in long-term debt. The company also uses domestic interest rate swaps
to manage the duration and interest rate characteristics of its outstanding
debt. The interest component of the swaps, which overlay a portion of the
company's interest payments on outstanding debt, is not carried at fair value in
the financial statements. The interest differential paid or received is
recognized as an adjustment to interest expense. Gains and losses on the
interest component of terminated swaps are deferred in noncurrent liabilities
and amortized as an adjustment to interest expense over the remaining term of
the original swap. In the event of early extinguishment of debt, any realized or
unrealized gains or losses from related swaps would be recognized in income
concurrent with the extinguishment.
The company also uses foreign currency forward contracts to hedge payments due
on cross currency interest rate swaps and intercompany loans and, along with
foreign currency options, to hedge material purchases, intercompany shipments
and other commitments. In addition, the company hedges a portion of its
contractual requirements of certain commodities with commodity swaps. These
contracts are not carried at fair value in the financial statements as the
related gains and losses are recognized in the same period and classified in the
same manner as the underlying transactions. Any gains and losses on terminated
contracts are deferred in current liabilities until the underlying transactions
occur.
-15-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF PRINCIPAL ACCOUNTING POLICIES--CONTINUED
The company deals only with investment-grade counterparties to these contracts
and monitors its overall credit risk and exposure to individual counterparties.
The company does not anticipate nonperformance by any counterparties. The amount
of the exposure is generally the unrealized gains in such contracts. The company
does not require, nor does it post, collateral or security on such contracts.
Net Earnings Per Common Share: In 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings Per Share," which replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of common stock equivalents such as
stock options. Diluted earnings per share amounts assume, if dilutive, the
exercise of options and vesting of restricted stock using the treasury stock
method. Earnings per share amounts, for all periods, have been presented, and
where appropriate, restated to conform to Statement 128 requirements.
The following table provides the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
December 31 (millions of dollars, except per share data) 1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Numerator
- ---------
Net earnings (loss):
Continuing operations $ (46) $ 141 $ 195
Discontinuing operations 31 15 14
------ ----- -----
Numerator for basic earnings (loss) per share (15) 156 209
Effect of dilutive securities:
Convertible debt - 4 4
------ ----- -----
Numerator for diluted earnings (loss) per share $ (15) $ 160 $ 213
====== ===== =====
Denominator
- -----------
For basic earnings (loss) per share-
weighted-average shares outstanding 74.7 74.3 73.9
Effect of dilutive securities:
Employee stock options - 0.7 0.7
Convertible debt - 2.2 2.2
------ ----- -----
Dilutive potential common shares - 2.9 2.9
Denominator for diluted earnings (loss) per share 74.7 77.2 76.8
====== ===== =====
Basic earnings (loss) from continuing operations $(0.62) $1.90 $2.64
Basic earnings (loss) (0.20) 2.10 2.83
====== ===== =====
Diluted earnings (loss) from continuing operation (0.62) 1.88 2.60
Diluted earnings (loss) (0.20) 2.08 2.78
====== ===== =====
</TABLE>
-16-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) BUSINESS ACQUISITIONS AND DISPOSITIONS
In January 1998, the company increased its majority ownership interest in
Whirlpool Narcissus Co., its Chinese joint venture that manufactures washing
machines, for approximately $12 million pending government approval.
In November 1997, the company completed the purchase of approximately 33% of the
voting shares, as well as preferred, or non-voting shares of the company's
Brazilian affiliate, Brasmotor S.A., for $217 million. The shares, combined with
the existing holdings, give the company a controlling interest of approximately
66% of the voting shares of Brasmotor. Brasmotor is the parent company of
Multibras S.A. Eletrodomesticos, which has appliance sales of $1.6 billion and
the leading market share position in Latin America, and Embraco, the world's
second largest hermetic compressor manufacturer with annual sales of
approximately $790 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) (Refer to Note 3).
In August 1997, the company sold its majority interest in its Argentine business
to Multibras S.A. Eletrodomesticos, in a share for share exchange of Whirlpool
Argentina shares for additional shares in Multibras, slightly increasing the
company's ownership stake 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 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.
In 1995, the company acquired a majority interest in Shunde SMC Microwave
Products Co., Ltd., a Chinese manufacturer and marketer of microwave ovens, for
about $90 million in cash. The company also acquired a majority interest in KOI,
a manufacturer and marketer of refrigerators, for about $116 million in cash.
The company invested $16 million for a majority interest in Whirlpool Narcissus
(Shanghai) Co. Ltd., a new Chinese joint venture, to produce washing machines.
The above acquisitions have been accounted for as purchases and their operating
results have been consolidated with the company's results since the dates of
acquisition. The proforma consolidated operating results reflecting these
acquisitions for the full year would not have been materially different from
reported amounts.
-17-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) DISCONTINUED OPERATIONS
During the third quarter of 1997, the company discontinued its financing
operations and adopted a plan to dispose of most of the assets of Whirlpool
Financial Corporation (WFC). The company recorded a pretax gain of $70 million
($42 million after-tax) related to the transaction.
In September 1997, the company reached a definitive agreement to sell the
majority of WFC's assets in a series of transactions to Transamerica
Distribution Finance Corporation (TDF). During the fourth quarter of 1997, the
company completed the sale of certain inventory floor planning financing assets
and international factoring assets to TDF for approximately $927 million. In
January 1998, the company sold to TDF additional international assets and
consumer financing receivable assets for approximately $370 million. The company
expects to record a pretax gain of approximately $22 million in the first
quarter of 1998 related to the completion of the TDF transactions. Under an
ongoing strategic partnership, TDF will continue to provide financing services
to the company's trade partners and customers. In separate transactions during
the fourth quarter of 1997, the company sold certain consumer financing
receivables for $98 million and entered into an agreement to sell a portion of
WFC's aerospace financing business for $168 million, of which $144 million was
sold in the first two months of 1998.
A $36 million operating charge ($22 million after-tax) was recorded in the third
quarter of 1997 to provide an additional reserve for certain retained WFC
aerospace assets.
Gross financing receivables and leases at December 31, 1997 and 1996 were $331
million and $2,128 million, respectively. Unearned income, estimated residual
value and allowances related to these leases were $(55) million and $(23)
million, respectively. Deferred income tax liabilities relating to financing
leases were $127 million and $123 million at December 31, 1997 and 1996.
Interest and discount charges are recognized in revenues using the effective
yield method. Lease income is recorded in decreasing amounts over the term of
the lease contract, resulting in a level rate of return on the net investment in
the lease. Origination fees and related costs are deferred and amortized as
yield adjustments over the life of the related receivable or lease. The
allowance for losses is maintained at estimated amounts necessary to cover
losses on all finance and leasing receivables based on management's assessment
of various factors including loss experience and review of problem accounts.
Net losses on financing receivables and leases were $35 million (excluding
operating charge), $40 million and $39 million in 1997, 1996 and 1995. Financing
receivables of $109 million, $108 million and $112 million are considered
impaired under Financial Accounting Standards Board Statement No. 114,
"Accounting by Creditors for Impairment of a Loan" at December 31, 1997 and
1996. Specific allowances for losses on these receivables total $65 million, $29
million and $19 million at December 31, 1997 and 1996. WFC recognized $5
million, $9 million and $12 million of interest income in 1997, 1996 and 1995 on
these receivables.
-18-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) INVENTORIES
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996
-------------------
<S> <C> <C>
Finished products $ 1,015 $ 991
Work in process 69 59
Raw materials 304 213
------- -------
Total FIFO cost 1,388 1,263
Less excess of FIFO cost over LIFO cost 218 229
------- -------
$ 1,170 $ 1,034
======= =======
</TABLE>
LIFO inventories represent approximately 24% and 39% of total inventories at
December 31, 1997 and 1996.
-19-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) AFFILIATED COMPANIES
The company has a 49% direct voting interest in a Mexican company (Vitromatic,
S.A. de C.V.) and direct voting interests ranging from 10% to 40% in several
other international companies principally engaged in the manufacture and sale of
major home appliances or related component parts. Prior to consolidation of the
company's Brazilian subsidiary for the last two months of 1997 (Refer to Note
1), results were reflected as equity earnings of affiliated companies. The
company's share of Brazilian results for 1997 was $78 million excluding
restructuring and operating charges and $64 million including restructuring and
operating charges.
Equity in the net earnings (loss) of affiliated companies, net of related taxes,
is as follows:
<TABLE>
<CAPTION>
(millions of dollars) 1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Brazilian affiliates $ 60 $ 92 $ 70
Mexican affiliate 5 (3) -
Other 2 4 2
-------- -------- --------
Total equity earnings $ 67 $ 93 $ 72
======== ======== ========
</TABLE>
Combined condensed financial information for all affiliated operating companies
(excluding Brazil in 1997) follows:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996
----------------------
<S> <C> <C>
Current assets $ 275 $ 1,365
Other assets 372 1,090
-------- --------
$ 647 $ 2,455
======== ========
Current liabilities $ 303 $ 795
Other liabilities 160 380
Stockholders' equity 184 1,280
-------- --------
$ 647 $ 2,455
======== ========
</TABLE>
-20-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(5) AFFILIATED COMPANIES--CONTINUED
(millions of dollars) 1997 1996 1995
-----------------------------------
<S> <C> <C> <C>
Net sales $ 937 $ 3,112 $ 2,772
Cost of products sold $ 596 $ 2,323 $ 2,122
Net earnings $ 17 $ 265 $ 192
Dividends and fees paid to
Whirlpool by affiliates $ 5 $ 20 $ 20
</TABLE>
-21-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) FINANCING ARRANGEMENTS
The company has unused credit lines of approximately $2.5 billion, including
$800 million expiring in 2002 and the remainder expiring in 1998. Generally, the
banks are compensated for their credit lines by a fee and do not require formal
compensating balances.
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996
--------------------
<S> <C> <C>
Payable to banks $ 558 $ 263
Commercial paper 752 1,761
Other 22 14
------- -------
$ 1,332 $ 2,038
======= =======
</TABLE>
The reduction of notes payable in 1997 from 1996 reflects a decrease in WFC
commercial paper (Refer to Note 3) net of an increase in notes payable to banks
resulting from the consolidation of Brasmotor S.A. (Refer to Note 2).
The weighted average interest rate on notes payable was 7.37% and 6.34% at
December 31, 1997 and 1996.
Although the majority of its operating assets have been divested, WFC remains a
legal entity with preferred stock arrangements as follows:
<TABLE>
<CAPTION>
Mandatory
Number Face Annual Redemption Date of
of Shares Value Dividend Date Issuance
--------- ----- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Series A 400,000 $100 $5.55 9/1/1998 8/31/1993
Series B 350,000 $100 $6.55 9/1/2008 8/31/1993
Series C 250,000 $100 $6.09 2/1/2002 12/27/1996
</TABLE>
The preferred stockholders are entitled to vote together on a share-for-share
basis with WFC's common stockholder. Preferred stock dividends are payable
quarterly. At its option, WFC may redeem the Series B at any time on or after
September 1, 2003 or at any earlier date for Series C. The redemption price for
each series is $100 per share plus any accrued unpaid dividends and the
applicable redemption premium if redeemed early. Commencing September 1, 2003,
WFC must pay $1,750,000 per year to a sinking fund for the benefit of the Series
B preferred stockholders, with a final payment of $26,250,000 due on or before
September 1, 2008. There are no sinking fund requirements for the Series A or
Series C preferred stock.
-22-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) FINANCING ARRANGEMENTS--CONTINUED
The company and WFC are parties to a support agreement. Pursuant to the
agreement, if at the close of any quarter WFC's net earnings available for fixed
charges (as defined) for the preceding twelve months is less than a stipulated
amount, the company is required to make a cash payment to WFC equal to the
insufficiency within 60 days of the end of the quarter. The support agreement
may be terminated by either WFC or the company upon 30 days notice provided that
certain conditions are met. The company has also agreed to maintain ownership of
at least 70% of WFC's voting stock.
In January 1997, the company paid $113 million to call the outstanding
subordinated zero coupon convertible notes resulting in an insignificant loss on
extinguishment. The call payment was financed through issuance of additional
commercial paper. At redemption, an aggregate principal amount of $372 million
was converted into 2.7 million shares of the company's common stock.
<TABLE>
<CAPTION>
Long-term debt consists of the following:
Interest
December 31 (millions of dollars) Maturity Rate 1997 1996
------------- ------------ ------------------------
<S> <C> <C> <C> <C>
Debentures 2008 and 2016 7.8 and 9.1% $ 368 $ 368
Senior notes 2000 and 2003 9.0 and 9.5 400 400
Medium term notes 1999 to 2006 8.7 to 9.1 25 25
Subordinated convertible notes - 113
Mortgage notes 1998 to 2012 6.3 to 6.6 65 67
Other 238 101
-------- --------
1,096 1,074
Less current maturities 22 119
-------- --------
$ 1,074 $ 955
======== ========
</TABLE>
Annual maturities of long-term debt in the next five years are $22 million, $180
million, $264 million, $51 million and $14 million.
The company paid interest, including a portion recorded as discontinued
operations, on short-term and long-term debt totaling $242 million, $228 million
and $232 million in 1997, 1996 and 1995.
-23-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating fair values of
financial instruments:
Cash and Equivalents and Notes Payable: The carrying amounts approximate fair
values.
Long-term Debt and WFC Preferred Stock: The fair values are estimated using
discounted cash flow analyses based on incremental borrowing or dividend yield
rates for similar types of borrowing or equity arrangements. The WFC preferred
stock carrying amount approximates fair value.
Derivative Financial Instruments: The fair values of interest rate swaps, cross
currency interest rate swaps, foreign currency forward contracts and option
collars and commodity swaps are based on quoted market prices.
-24-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUED
The carrying amounts and fair values of financial instruments for which the fair
value does not approximate the liability carrying amount are as follow:
<TABLE>
<CAPTION>
1997 1996
---------------------------- -----------------------------
Carrying Fair Carrying Fair
December 31 (millions of dollars) Amount Value Amount Value
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Long-term debt (including current portion) $ 1,174 $ 1,280 $ 1,053 $ 1,118
Derivative financial instruments (notional
amounts indicated):
Hedges of net investment in Europe including
converted debt:
Interest rate and cross currency interest rate
swaps ($1,390 million in 1997;
$1,506 million in 1996) (78) (42) 21 110
Foreign currency forward contracts
($7 million in 1997; $1 million in 1996) - - - -
Domestic interest rate swaps
($240 million in 1997; $240 million in 1996) - (4) - (1)
Transaction hedges:
Foreign currency forward contracts
($736 million in 1997; $950 million in 1996) - (2) - -
Foreign currency options
($- million in 1997; $- million in 1996 - - - -
Hedges with commodity swaps
($19 million in 1997; $35 million in 1996) - 1 - -
WFC interest rate and cross currency swaps
($30 million in 1997; $44 million in 1996) - - - -
--------- --------- --------- ---------
Total long-term debt $ 1,096 $ 1,233 $ 1,074 $ 1,227
========= ========= ========= =========
</TABLE>
-25-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUED
At December 31, 1997, interest rate and cross currency interest rate swaps
effectively convert $876 million of U.S. dollar denominated debt into European
currency denominations ($468 million - German marks, $319 million - French
francs, $39 million - Swiss francs and $50 million - British pounds). About 38%
of this converted debt has floating rates and 62% has fixed rates. Floating
rates received range from LIBOR less .9% to LIBOR, and floating rates paid range
from local currency LIBOR to local currency LIBOR plus 3.25%. Fixed rates
received range from 3.55% to 7.20%, and fixed rates paid range from 5.13% to
9.25%. The swaps mature within nine years.
At December 31, 1997, domestic interest rate swaps effectively convert $240
million of fixed rate debt into floating rate debt. Fixed rates received range
from 6.99% to 7.21%. Floating rates paid are LIBOR. The domestic interest rate
swaps mature within five years.
At December 31, 1997, WFC interest rate swaps effectively convert $26 million of
floating rate debt into fixed rate debt as well as converting $4 million of U.S.
dollar denominated debt into Canadian currency denomination. Floating rates
received are based on LIBOR or commercial paper rates, and fixed rates paid
range from 6.33% to 8.83%. The WFC swaps mature within four years.
Foreign currency forward contracts mature within one day to two years and
involve principally European and North American currencies. Copper and zinc
commodity swaps mature within two years.
-26-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) STOCKHOLDERS' EQUITY
In addition to its common stock, the company has 10 million authorized shares of
preferred stock (par value $1 per share), none of which is outstanding.
Consolidated retained earnings at December 31, 1997 included $20 million of
equity in undistributed net earnings of affiliated companies.
The cumulative translation component of stockholders' equity represents the
effect of translating net assets of the company's international subsidiaries
offset by related hedging activity net of tax. Conversion of notes, stock
option transactions and restricted stock grants account for the changes in paid-
in capital.
One Preferred Stock Purchase Right (Rights) is outstanding for each share of
common stock. The Rights, which expire May 23, 1998, will become exercisable 10
days after a person or group either becomes the beneficial owner of 20% or more
of the common stock or commences a tender or exchange offer that would result in
such person or group beneficially owning 25% or more of the outstanding common
stock. Each Right entitles the holder to purchase from the company one newly
issued unit consisting of one one-hundredth of a share of Series A Participating
Cumulative Preferred Stock at an exercise price of $100, subject to adjustment.
If (i) any person or group becomes the beneficial owner of 25% or more of
Whirlpool common stock, or (ii) the company is the surviving corporation in a
merger with a 20% or more stockholder and its common stock is not changed or
converted, or (iii) a 20% or more stockholder engages in certain self-dealing
transactions with the company, then each Right not owned by such person will
entitle the holder to purchase, at the Rights' then current exercise price,
shares of the company's common stock having a value of twice the Rights' then
current exercise price. In addition, if the company is involved in a merger in
which its common stock is converted or sells 50% or more of its assets, each
Right will entitle its holder to purchase for the exercise price shares of
common stock of the acquiring successor company having a value of twice the
Rights' then current exercise price.
The company will be entitled to redeem the Rights in whole, but not in part, at
$.05 per Right at any time prior to the expiration of a 10 day period (subject
to extension) following public announcement of the existence of a 20% holder or
of a 25% or more tender offer. Until such time as the Rights become
exercisable, the Rights have no voting or dividend privileges and are attached
to, and do not trade separately from, the common stock.
At December 31, 1997, one million preferred shares were reserved for future
exercise of Stock Purchase Rights.
-27-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) STOCK OPTION AND INCENTIVE PLANS
The company's stock option and incentive plan permits the grant of stock options
and other stock awards covering up to 9.4 million shares to key employees of the
company and its subsidiaries, of which 1.9 million shares are available for
grant at December 31, 1997. The plan authorizes the grant of both incentive and
nonqualified stock options and, further, authorizes the grant of stock
appreciation rights and related supplemental cash payments independently of or
with respect to options granted or outstanding. Stock options generally have 10
year terms, and vest and become fully exercisable over a two to three year
period after date of grant. An Executive Stock Appreciation and Performance
Program (ESAP), a Restricted Stock Value Program (RSVP) and a Career Stock
Program (CSP) have been established under the plan. Performance awards under
ESAP and RSVP are generally earned over multiyear time periods upon the
achievement of certain performance objectives or upon a change in control of the
company. CSP awards are earned at specified dates during a participant's career
with the company or upon change in control of the company. ESAP awards are
payable in cash, common stock, or a combination thereof when earned. RSVP
grants restricted shares which may not be sold, transferred or encumbered until
the restrictions lapse. CSP grants phantom stock awards which are redeemable
for shares of the company's common stock upon the recipient's retirement after
attaining age 60 and are subject to certain noncompetition provisions.
Outstanding restricted and phantom shares totaled 882,400 with a weighted-
average grant-date fair value of $46.07 per share at December 31, 1997 and
984,400 with a weighted-average grant-date fair value of $46.84 per share at
December 31, 1996. Expenses under the plan were $21 million, $3 million and $5
million in 1997, 1996 and 1995.
Under the Nonemployee Director Stock Ownership Plan, each nonemployee director
is automatically granted 400 shares of common stock annually and is eligible for
a stock option grant of 600 shares if the company's earnings meet a prescribed
earnings formula. This plan provides for the grant of up to 200,000 shares as
either stock or stock options, of which 143,000 shares are available for grant
at December 31, 1997. The stock options vest and become exercisable six months
after date of grant. There were no significant expenses under this plan for
1997, 1996 or 1995.
The company maintains an employee stock option plan (PartnerShare) that grants
substantially all full-time U.S. employees a fixed number of stock options that
vest over a three year period and may be exercised over a 10 year period.
PartnerShare authorizes the grant of up to 2.5 million shares of which 500,000
shares are available for grant at December 31, 1997.
Stock option and incentive plans are accounted for in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related Interpretations. Generally, no compensation expense is recognized for
stock options with exercise prices equal to the market value of the underlying
shares of stock at the date of grant. Compensation expense is recognized for
ESAP, RSVP and CSP awards based on the market value of the underlying shares of
stock when the number of shares is determinable.
-28-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) STOCK OPTION AND INCENTIVE PLANS--CONTINUED
Had the company elected to adopt recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," under which stock options are
accounted for at estimated fair value, proforma net earnings (loss) and diluted
net earnings (loss) per share would be as follows:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Net earnings (loss) $ (15) $ 156 $ 209
As reported (21) 153 209
Proforma
Diluted net earnings (loss) per share
As reported $ (0.20) $ 2.08 $ 2.78
Proforma (0.28) 2.04 2.77
</TABLE>
The fair value of stock options used to compute proforma net earnings (loss) and
earnings (loss) per share disclosures is the estimated present value at grant
date using the Black-Scholes option-pricing model with the following
assumptions: expected volatility factor of .183; dividend yield of 2.4%; risk-
free interest rate of 5.5% and a weighted-average expected option life of 5
years.
The effects of proforma disclosures of applying SFAS No. 123 are not likely to
be representative of the effects of such disclosures in future years. Statement
No. 123 is applicable only to options granted subsequent to December 15, 1994,
therefore the full proforma effect is not reflected in the years presented.
-29-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) STOCK OPTION AND INCENTIVE PLANS--CONTINUED
A summary of stock option information follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted- Weighted- Weighted-
December 31 Average Average Average
(thousands of shares, Number Exercise Number Exercise Number Exercise
except per share data) of Shares Price of Shares Price of Shares Price
--------- -------- --------- --------- --------- ---------
Outstanding at January 1 4,127 $ 46.31 3,397 $ 43.99 3,214 $ 39.96
Granted 1,360 45.78 1,282 50.62 723 55.75
Exercised (842) 39.83 (331) 34.06 (427) 32.65
Canceled or expired (415) 50.12 (221) 53.99 (113) 47.62
--------- --------- ---------
Outstanding at December 31 4,230 $ 47.06 4,127 $ 46.31 3,397 $ 43.99
========= ======== ========= ========= ========= =========
Exercisable at December 31 2,308 $ 46.43 2,438 $ 42.43 2,307 $ 38.60
========= ======== ========= ========= ========= =========
Fair Value of options
granted during the year $ 9.26 $ 10.24 $ 11.28
======== ========= =========
</TABLE>
Of the outstanding options at December 31, 1997, 885,000 shares granted prior to
1993 (all of which are exercisable) have exercise prices ranging from $24.75 to
$37.50 and a weighted-average remaining contractual life of 3.4 years, while
4,385,000 shares granted subsequent to 1992 (of which 1,423,000 shares are
currently exercisable at a weighted-average exercise price of $53.69) have
exercise prices ranging from $45.75 to $55.81 and a weighted-average remaining
contractual life of 8.3 years.
-30-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) RESTRUCTURING AND OTHER SPECIAL CHARGES
Restructuring costs in 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996
------------
<S> <C> <C>
Cash costs:
Employee severance and related payments $198 $ 9
Lease termination, facility disposition
and other costs 46 3
---- ---
Total cash costs 244 12
Noncash costs:
Loss on disposal of facilities and equipment 57 -
Other asset write-downs 42 18
---- ---
Total non-cash costs 99 18
---- ---
$343 $30
==== ===
</TABLE>
During 1997, the company incurred restructuring costs of $343 million to better
align the company's cost structure within the global home-appliance marketplace.
Pretax restructuring charges of $172 million, $101 million, $35 million, $25
million and $10 million relate to the company's European, Asian, Latin American,
Corporate and North American operations. The restructuring charge includes the
elimination of about 7,900 global positions between 1997 and 2000. About 25% of
the cash costs were paid in 1997, with the remainder to be paid in 1998 and
1999. The impact of 1997 restructuring costs after-tax and minority interest
was $232 million or $3.07 per diluted share.
In 1997, the company also recognized special charges of $62 million ($53 million
of which affected operating profit), principally due to the adjustment of the
carrying value of receivables and inventory, primarily in Europe and Asia. The
impact of 1997 special operating charges on continuing operations after-tax and
minority interest was $40 million or $.54 per diluted share. In addition,
discontinued operations results include a pretax charge of $36 million, after-
tax charge of $22 million or $.29 per diluted share to provide a reserve for
certain WFC aerospace assets.
In 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 the Whirlpool Asian headquarters. 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
50% 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 diluted share.
-31-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) INCOME TAXES
Income tax provisions from continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars) 1997 1996 1995
----------------------------------
<S> <C> <C> <C>
Current:
Federal $ 78 $ 72 $ 37
State and local $ 20 $ 17 $ 4
Foreign $ 26 $ 7 $ 24
--------- --------- --------
124 96 65
Deferred:
Federal $ (27) $ (7) $ 26
State and local $ (3) $ 1 $ 7
Foreign $ (103) $ (20) $ (8)
--------- --------- --------
(133) (26) 25
--------- --------- --------
$ (9) $ 70 $ 90
========= ========= ========
</TABLE>
Inclusive of discontinued operations (Refer to Note 3) provisions for income
taxes were $(12) million, $81 million and $100 million for 1997, 1996 and 1995,
respectively.
Domestic and foreign earnings (loss) before income taxes and other items from
continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars) 1997 1996 1995
----------------------------------
<S> <C> <C> <C>
Domestic $ 288 $ 288 $ 199
Foreign (459) (188) 15
--------- --------- --------
$ (171) $ 100 $ 214
========= ========= ========
</TABLE>
Earnings (loss) before income taxes and other items, including discontinued
operations (Refer to Note 3), were $(178) million, $130 million and $242 million
for 1997, 1996 and 1995, respectively.
-32-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) INCOME TAXES--CONTINUED
Reconciliations between the U.S. federal statutory income tax rate and the
consolidated effective income tax (benefit) rate for earnings before income
taxes and other items for continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31 1997 1996 1995
--------------------------
<S> <C> <C> <C>
U.S. federal statutory rate (35.0)% 35.0% 35.0%
Impact of restructuring charge 18.2 (0.5) --
State and local taxes, net of
federal tax benefit 8.8 12.4 4.0
Nondeductible goodwill amortization 2.3 9.9 4.9
Settlement of prior year taxes -- -- (5.1)
Excess foreign taxes (benefits) (4.0) (5.8) 4.5
Net benefits from unrecognized prior year
deferred tax assets and carryfowards (5.1) (6.2) (7.7)
Unbenefited operation losses 10.9 23.2 3.2
Nondeductible interest -- 4.3 1.9
Research tax credits (0.6) (9.0) (0.9)
Other items (0.5) 6.8 2.4
----- ---- ----
Effective income tax (benefit) rate (5.0)% 70.1% 42.2%
===== ==== ====
</TABLE>
Inclusive of discontinued operations, the effective income tax (benefit) rate
was (6.9)%, 61.9% and 41.3% for 1997, 1996 and 1995, respectively.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities used for financial
reporting purposes and the amounts used for income tax purposes.
-33-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) INCOME TAXES --CONTINUED
Significant components of the company's deferred tax liabilities and assets are
as follows:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996
-----------------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ 166 $ 162
Financial services leveraged leases 126 123
Other 23 38
------- -------
Total deferred tax liabilities 315 323
Deferred tax assets:
Postretirement obligation 161 151
Reserves 17 20
Restructuring costs 68 20
Product warranty accrual 20 20
Receivable and inventory allowances 97 2
Prepaid expenses 11 9
Loss carryforwards 125 88
Employee compensation 35 21
Other 24 27
------- -------
Total deferred tax assets 558 358
Valuation allowances for deferred tax assets (25) (30)
------- -------
Deferred tax assets, net of valuation allowances 533 328
------- -------
Net deferred tax assets $ 218 $ 5
------- -------
</TABLE>
The company has recorded valuation allowances to reflect the estimated amount of
net operating loss carryforwards, restructuring costs and other deferred tax
assets which may not be realized.
The company provides deferred taxes on the undistributed earnings of foreign
subsidiaries and affiliates to the extent such earnings are expected to be
remitted. Generally, earnings have been remitted only when no significant net
tax liability would have been incurred. No provision has been made for U.S. or
foreign taxes that may result from future remittances of the undistributed
earnings ($442 million at December 31, 1997) of foreign subsidiaries and
affiliates expected to be reinvested indefinitely. Determination of the deferred
income tax liability on these unremitted earnings is not practicable as such
liability, if any, is dependent on circumstances existing when remittance
occurs.
The company paid income taxes of $23 million in 1997 and $102 million in both
1996 and 1995.
At December 31, 1997, the company has foreign net operating loss carryforwards
of $330 million which are primarily nonexpiring.
-34-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) PENSION PLANS
The company maintains both contributory and noncontributory defined benefit
pension plans covering substantially all North American and Brazilian employees
and certain European employees. Benefits are based primarily on compensation
during a specified period before retirement or specified amounts for each year
of service. The company's present funding policy is to generally make the
minimum annual contribution required by applicable regulations. Assets held by
the plans consist primarily of listed common stocks and bonds, government
securities, investments in trust funds, bank deposits and other investments.
In 1997, the company recognized settlement gains, net of termination benefit
cost, of $12 million. These related to the sale of the WFC inventory and
consumer financing businesses and a voluntary retirement program offered to
certain other North American employees. The WFC retirement plan was merged into
the Whirlpool Salaried Retirement Plan during the fourth quarter of 1997.
Pension cost, excluding the net gains described above, includes the following
components:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996 1995
-------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 41 $ 40 $ 36
Interest cost on projected benefit obligation 84 80 77
Actual return on plan assets (204) (157) (267)
Net deferral/amortization 99 50 164
------- ------ ------
$ 20 $ 13 $ 10
======= ====== ======
</TABLE>
Assumptions used in accounting for defined benefit pension plans are as follows:
<TABLE>
<CAPTION>
December 31 1997 1996 1995
-------------------------------
<S> <C> <C> <C>
Discount rate 6.0-9.0% 6.5-9.0% 7.0-9.0%
Rate of compensation level increase 2.5-9.0% 2.5-6.0% 3.5-6.5%
Expected long-term rate of return on
plan assets 4.5-9.5% 6.5-9.5% 6.5-9.5%
</TABLE>
-35-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) PENSION PLANS--CONTINUED
The funded status of the pension plans is as follows:
<TABLE>
<CAPTION>
Plans Whose Assets Plans Whose
Exceed Accumulated Accumulated Benefits
Benefits Exceed Plan Assets
------------------- --------------------
December 31 (millions of dollars) 1997 1996 1995 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Projected benefit obligation $ (943) $ (913) $ (312) $ (144)
Plan assets at fair value 1,312 1,259 140 63
-------- -------- -------- --------
Plan assets in excess of (less
than) projected benefit
obligation 369 346 (172) (81)
Unrecognized prior service cost 69 47 14 7
Unrecognized net experience gain (369) (342) 4 4
Unrecognized net obligation,
net of amortization (15) (20) 48 (1)
Additional minimum liability -- -- (7) (5)
-------- -------- -------- --------
Pension asset (liability)
included in other assets
(postemployment benefits) $ 54 $ 31 $ (113) $ (76)
======== ======== ======== ========
</TABLE>
The accumulated benefit obligation, which is included in the projected benefit
obligation, represents the actuarial present value of benefits attributed to
employee service and compensation levels to date. The accumulated benefit
obligation was $1,054 million and $919 million at December 31, 1997 and 1996.
The vested portion was $932 million and $812 million at December 31, 1997 and
1996.
The U.S. pension plans provide that in the event of a plan termination within
five years following a change in control of the company, any assets held by the
plans in excess of the amounts needed to fund accrued benefits would be used to
provide additional benefits to plan participants. A change in control generally
means one not approved by the incumbent board of directors, including an
acquisition of 25% or more of the voting power of the company's outstanding
stock or a change in a majority of the incumbent board.
Certain European subsidiaries maintain termination indemnity and special
severance plans. The cost of these plans, determined in accordance with local
government specifications, was $15 million and $12 million in 1996 and 1995. The
costs in 1997 were immaterial due to a lower termination rate than prior years.
The company maintains a 401(k) defined contribution plan covering substantially
all U.S. employees. Company matching contributions for domestic hourly and
certain other employees under the plan, based on the company's annual operating
results and the level of individual participant's contributions, amounted to $6
million, $7 million and $5 million in 1997, 1996 and 1995.
-36-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) POSTRETIREMENT BENEFIT PLANS
The company currently sponsors a defined benefit health-care plan that provides
postretirement medical benefits to full time U.S. employees who have worked 5
years and attained age 55 while in service with the company. The plan is
currently noncontributory and contains cost-sharing features such as
deductibles, coinsurance and a lifetime maximum. The company does not fund the
plan. No significant postretirement benefits are provided by the company to
non-U.S. employees.
The components of the annual postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996 1995
----------------------
<S> <C> <C> <C>
Service cost $10 $11 $10
Interest cost 29 28 26
--- --- ---
$39 $39 $36
=== === ===
</TABLE>
The components of the postretirement obligation are as follows:
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1997 1996
---------------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $200 $181
Fully eligible active participants 78 87
Other active plan participants 110 114
---- ----
Total 388 382
Unrecognized gain (loss) 14 (1)
---- ----
Postretirement obligation $402 $381
==== ====
</TABLE>
The assumed health-care trend rate decreases gradually from 8% in 1997 to 7% in
1998 and 1999 and finally to 6% in 2000 and future years. Increasing the
health-care trend rate by one percentage point would increase the accumulated
postretirement benefit obligation as of December 31, 1997 by $28 million and
increase the annual postretirement benefit cost for 1997 by $3 million.
Discount rates of 7.75% and 8.0% were used to determine the accumulated
postretirement benefit obligation at December 31, 1997 and 1996.
-37-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) CONTINGENCIES
The company is involved in various legal actions arising in the normal course of
business. Management, after taking into consideration legal counsel's evaluation
of such actions, is of the opinion that the outcome of these matters will not
have a material adverse effect on the company's financial position.
The company is a party to certain financial instruments with off-balance-sheet
risk which are entered into in the normal course of business. These instruments
consist of financial guarantees, repurchase agreements and letters of credit.
The company's exposure to credit loss in the event of nonperformance by the
debtors is the contractual amount of the financial instruments. The company uses
the same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments. Collateral or other security is generally
required to support financial instruments with off-balance-sheet credit risk.
At December 31, 1997 the company had $212 million in receivables subject to
recourse provisions with TDF (Refer to Note 3).
-38-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) BUSINESS SEGMENT INFORMATION
Geographic Segments
<TABLE>
<CAPTION>
North Other and Major Home
(millions of dollars) America Europe Eliminations Appliances
------- ------ ------------ ----------
<S> <C> <C> <C> <C>
Net sales
1997 $5,382 $2,431 $ 804 $8,617
1996 $5,441 $2,592 $ 490 $8,523
1995 $5,093 $2,502 $ 568 $8,163
Operating profit (loss)
1997 $ 347 $ (145) $ (191) $ 11
1996 $ 380 $ (17) $ (85) $ 278
1995 $ 314 $ 90 $ 38 $ 366
Identifiable assets
1997 $2,084 $1,624 $3,984 $7,692
1996 $2,080 $1,951 $2,135 $6,166
1995 $2,171 $2,084 $1,913 $6,168
Depreciation expense
1997 $ 171 $ 110 $ 18 $ 299
1996 $ 164 $ 107 $ 20 $ 291
1995 $ 140 $ 105 $ 8 $ 253
Net capital expenditures
1997 $ 140 $ 84 $ 151 $ 375
1996 $ 160 $ 103 $ 70 $ 333
1995 $ 262 $ 186 $ 29 $ 477
</TABLE>
The "Other and Eliminations" column includes $1,714 million in 1997 for
Brazilian identifiable assets.
-39-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) BUSINESS SEGMENT INFORMATION--CONTINUED
Identifiable assets are those assets directly associated with the respective
operating activities. Corporate assets which consist principally of cash,
investments, prepaid expenses, intangibles, deferred income taxes and property
and equipment related to corporate activities are included as other.
Substantially all of the company's trade receivables are from distributors and
retailers.
Sales activity with Sears, Roebuck and Co., a North American major home
appliance retailer, represented 20%, 21% and 20% of consolidated net sales in
1997, 1996 and 1995. Related receivables were 16%, 25% and 14% of consolidated
trade receivables for December 31, 1997, 1996 and 1995.
-40-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) *
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------
(millions of dollars,a except per share data) December 31 September 30 June 30 March 31
----------- ------------ ------- --------
1997
<S> <C> <C> <C> <C>
Net sales $2,510 $2,043 $2,074 $1,990
Cost of products sold $1,887 $1,593 $1,588 $1,536
Earnings (loss) from continuing operations $ 50 $ (200) $ 61 $ 43
Net earnings (loss) $ 92 $ (218) $ 65 $ 46
Per share of common stock:
Basic earnings (loss) from continuing operations $ .67 $(2.68) $ .82 $ .57
Basic net earnings (loss) $ 1.24 $(2.93) $ .87 $ .62
Diluted earnings (loss) from continuting operations $ .66 $(2.68) $ .81 $ .57
Diluted net earnings (loss) $ 1.22 $(2.93) $ .86 $ .62
Dividends paid $ .34 $ .34 $ .34 $ .34
Stock price:
High $ 66 15/16 $ 69 1/2 $ 55 1/4 $ 52 1/2
Low $ 51 7/8 $ 48 $ 45 1/4 $ 46
Close $ 55 $ 66 5/16 $ 54 9/16 $ 47 5/8
</TABLE>
Restructuring and other special charges described in Note 10 reduced third and
fourth quarter earnings from continuing operations by $258 million and $14
million, respectively. Discontinued operations include a third quarter after-tax
charge of $22 million to provide a reserve for certain WFC assets and a $42
million after-tax gain in the fourth quarter for the sale of WFC assets (Refer
to Note 3).
Fourth quarter 1997 included two months of consolidated Brazilian results, $5
million relating to the elimination of the Brazil one month lag in reporting
equity earnings and $8 million related to the pension settlement gain (Refer to
Note 12).
-41-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)*--CONTINUED
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------
(millions of dollars, except per share data) December 31 September 30 June 30 March 31
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1996
Net sales $ 2,126 $ 2,155 $ 2,229 $ 2,013
Cost of products sold $ 1,644 $ 1,679 $ 1,737 $ 1,563
Earnings from continuing operations $ 40 $ 19 $ 48 $ 34
Net earnings $ 45 $ 21 $ 52 $ 38
Per share of common stock:
Basic earnings from continuing operations $ .54 $ .26 $ .64 $ .46
Basic net earnings $ .60 $ .28 $ .71 $ .51
Diluted earnings from continuing operations $ .53 $ .26 $ .63 $ .46
Diluted net earnings $ .59 $ .28 $ .70 $ .51
Dividends paid $ .34 $ .34 $ .34 $ .34
Stock price:
High $ 50 7/8 $ 53 1/8 $ 61 3/8 $ 59 1/2
Low $ 44 1/4 $ 47 7/8 $ 48 $ 50 1/8
Close $ 46 5/8 $ 50 5/8 $ 49 5/8 $ 55 1/4
</TABLE>
Restructuring initiatives described in Note 10 reduced third quarter net
earnings by $19 million or $.25 per diluted share.
* The 1996 and first three quarters of 1997 earnings per share amounts have been
restated to reflect WFC as a discontinued operation and to comply with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." As a result of
the company's 1997 full year net loss, diluted earnings per share on a year-to-
date basis does not equal the sum of the individual quarters' diluted earnings
per share.
-42-
<PAGE>
Report of Ernst & Young LLP,
Independent Auditors
- --------------------------------------------------------------------------------
The Stockholders and Board of Directors
Whirlpool Corporation
Benton Harbor, Michigan
We have audited the accompanying consolidated balance sheets of Whirlpool
Corporation as of December 31, 1997 and 1996, and the related consolidated
statements of earnings and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Brasmotor S.A. and its consolidated subsidiaries, whose statements
reflect total assets of $2,200 million and $2,100 million as of December 31,
1997 and 1996, respectively and net earnings of $41 million and $120 million for
the years ended December 31, 1997 and 1996, respectively. Those statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to data included for Brasmotor S.A. and its
consolidated subsidiaries, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits and the reports of the other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Whirlpool Corporation at
December 31, 1997 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Chicago, Illinois
January 26, 1998
Report by Management on the
Consolidated Financial Statements
- --------------------------------------------------------------------------------
The management of whirlpool Corporation has prepared the accompanying financial
statements. The financial statements have been audited by Ernst & Young,
independent auditors, whose report, based upon their audits and the reports of
other independent auditors, expresses the opinion that these financial
statements present fairly the consolidated financial position, results of
operations and cash flows of Whirlpool and subsidiaries in accordance with
generally accepted accounting principles. Their audits are conducted in
conformity with generally accepted auditing standards.
The financial statements were prepared from the company's accounting
records, books and accounts which, in reasonable detail, accurately and fairly
reflect all material transactions. The company maintains a system of internal
controls designed to provide reasonable assurance that the company's accounting
records, books and accounts are accurate and that transactions are properly
recorded in the company's books and records, and the company's assets are
maintained and accounted for, in accordance with management's authorizations.
The company's accounting records, policies and internal controls are regularly
reviewed by an internal audit staff.
The audit committee of the board of directors of the company, which is
composed of four directors who are not employed by the company, considers and
makes recommendations to the board of directors as to accounting and auditing
matters concerning the company, including recommending for appointment by the
board the firm of independent auditors engaged on an annual basis to audit the
financial statements of Whirlpool and its majority-owned subsidiaries. The audit
committee meets with the independent auditors at least three times each year to
review the scope of the audit, the results of the audit and such recommendations
as may be made by said auditors with respect to the company's accounting methods
and system of internal controls.
/s/Ralph F. Hake
Ralph F. Hake
Senior Executive Vice President and Chief Financial Officer
February 10, 1998
43
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED OPERATIONS 1997 1996 1995 1994 1993 1992
- ----------------------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 8,617 $ 8,523 $ 8,163 $ 7,949 $ 7,368 $ 7,097
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit (1) $ 11 $ 278 $ 366 $ 370 $ 504 $ 447
Earnings (loss) from continuing operations before
income taxes and other items $ (171) $ 100 $ 214 $ 269 $ 418 $ 334
Earnings (loss) from continuing operations $ (46) $ 141 $ 195 $ 147 $ 257 $ 179
Earnings (loss) from discontinued operations (2) $ 31 $ 15 $ 14 $ 11 $ (28) $ 26
Net earnings (loss) (3) $ (15) $ 156 $ 209 $ 158 $ 51 $ 205
- ------------------------------------------------------------------------------------------------------------------------------------
Net capital expenditures $ 378 $ 336 $ 483 $ 418 $ 309 $ 288
Depreciation $ 322 $ 318 $ 282 $ 246 $ 241 $ 275
Dividends $ 102 $ 101 $ 100 $ 90 $ 85 $ 77
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL POSITION
- -------------------------------
Current assets $ 4,281 $ 3,812 $ 3,541 $ 3,078 $ 2,708 $ 2,740
Current liabilities $ 3,676 $ 4,022 $ 3,829 $ 2,988 $ 2,763 $ 2,887
Working capital $ 605 $ (210) $ (288) $ 90 $ (55) $ (147)
Property, plant and equipment-net $ 2,375 $ 1,798 $ 1,779 $ 1,440 $ 1,319 $ 1,325
Total assets $ 8,270 $ 8,015 $ 7,800 $ 6,655 $ 6,047 $ 6,118
Long-term debt $ 1,074 $ 955 $ 983 $ 885 $ 840 $ 1,215
Stockholders' equity $ 1,771 $ 1,926 $ 1,877 $ 1,723 $ 1,648 $ 1,600
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
- --------------
Basic earnings (loss) from continuing operations
before accounting change $(0.62) $ 1.90 $ 2.64 $ 1.98 $ 3.60 $ 2.55
Diluted earnings (loss) from continuing operations
before accounting change $(0.62) $ 1.88 $ 2.60 $ 1.95 $ 3.47 $ 2.46
Diluted net earnings (loss) (3) $(0.20) $ 2.08 $ 2.78 $ 2.10 $ 0.71 $ 2.81
Dividends $ 1.36 $ 1.36 $ 1.36 $ 1.22 $ 1.19 $ 1.10
Book value $23.71 $ 25.93 $ 25.40 $ 23.21 $ 23.17 $ 22.91
Closing Stock Price - NYSE $ 55 $ 46 5/8 $ 53 1/4 $ 50 1/4 $ 66 1/2 $ 44 5/8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(millions of dollars except share and employee data)
<TABLE>
<CAPTION>
CONSOLIDATED OPERATIONS 1991 1990 1989 1988 1987
- ----------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales $ 6,550 $ 6,424 $ 6,138 $ 4,306 $ 4,104
- -----------------------------------------------------------------------------------------------------------------
Operating profit (1) $ 353 $ 300 $ 377 $ 227 $ 283
Earnings (loss) from continuing operations before
income taxes and other items $ 256 $ 177 $ 281 $ 210 $ 265
Earnings (loss) from continuing operations $ 139 $ 45 $ 169 $ 146 $ 173
Earnings (loss) from discontinued operations (2) $ 31 $ 27 $ 18 $ (52) $ 8
Net earnings (loss) (3) $ 170 $ 72 $ 187 $ 94 $ 192
- -----------------------------------------------------------------------------------------------------------------
Net capital expenditures $ 287 $ 265 $ 208 $ 166 $ 223
Depreciation $ 233 $ 247 $ 222 $ 143 $ 133
Dividends $ 76 $ 76 $ 76 $ 76 $ 79
- -----------------------------------------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL POSITION
- -------------------------------
Current assets $ 2,920 $ 2,900 $ 2,889 $ 1,827 $ 1,690
Current liabilities $ 2,931 $ 2,651 $ 2,251 $ 1,374 $ 1,246
Working capital (11) $ 249 $ 638 $ 453 $ 444
Property, plant and equipment-net $ 1,400 $ 1,349 $ 1,288 $ 820 $ 779
Total assets $ 6,445 $ 5,614 $ 5,354 $ 3,410 $ 3,137
Long-term debt $ 1,528 $ 874 $ 982 $ 474 $ 367
Stockholders' equity $ 1,515 $ 1,424 $ 1,421 $ 1,321 $ 1,304
- -----------------------------------------------------------------------------------------------------------------
PER SHARE DATA
- --------------
Basic earnings (loss) from continuing operations
before accounting change $ 2.00 $ 0.65 $ 2.44 $ 2.11 $ 2.41
Diluted earnings (loss) from continuing operations
before accounting change $ 1.98 $ 0.65 $ 2.44 $ 2.10 $ 2.41
Diluted net earnings (loss) (3) $ 2.41 $ 1.04 $ 2.70 $ 1.36 $ 2.67
Dividends $ 1.10 $ 1.10 $ 1.10 $ 1.10 $ 1.10
Book value $ 21.78 $ 20.51 $ 20.49 $ 19.06 $ 18.83
Closing Stock Price - NYSE $ 38 7/8 $ 23 1/2 $ 33 $ 24 3/4 $ 24 3/8
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
KEY RATIOS (4)
- ----------
Operating profit margin 0.1% 3.3% 4.5% 4.7% 6.8% 6.3%
Pre-tax margin (5) (2.0)% 1.2% 2.6% 3.4% 5.7% 4.7%
Net margin (6) (0.5)% 1.7% 2.4% 1.8% 3.5% 2.5%
Return on average stockholders' equity (7) (0.8)% 8.2% 11.6% 9.4% 14.2% 13.1%
Return on average total assets (8) (0.7)% 1.8% 3.0% 2.8% 4.0% 3.3%
Current assets to current liabilities 1.2 0.9 0.9 1.0 1.0 0.9
Total debt-appliance business
as a percent of invested capital (9) 38.5% 42.6% 43.3% 34.4% 31.6% 41.7%
Price earnings ratio -- 22.4 19.2 23.9 21.2 15.9
Interest coverage (10) 0.7 2.4 3.1 4.0 5.0 3.4
- ------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
- ----------
Number of common shares
outstanding (in thousands):
Average - on a diluted basis 74,697 77,178 76,812 77,588 76,013 75,661
Year-end 75,262 74,415 74,081 73,845 73,068 70,027
Number of stockholders (year-end) 10,171 11,033 11,686 11,821 11,438 11,724
Number of employees (year-end) 61,370 48,163 45,435 39,016 39,590 38,520
Total return to shareholders
(five year annualized) (11) 6.8% 6.3% 20.8% 12.0% 25.8% 17.0%
1991 1990 1989 1988 1987
---- ---- ---- ---- ----
KEY RATIOS (4)
- ----------
Operating profit margin 5.4% 4.7% 6.1% 5.3% 6.9%
Pre-tax margin (5) 3.9% 2.8% 4.6% 4.9% 6.5%
Net margin (6) 2.1% 0.7% 2.8% 3.4% 4.2%
Return on average stockholders' equity (7) 11.6% 5.1% 13.7% 7.2% 13.6%
Return on average total assets (8) 2.9% 1.4% 4.9% 2.9% 6.0%
Current assets to current liabilities 1.0 1.1 1.3 1.3 1.4
Total debt-appliance business
as a percent of invested capital (9) 46.1% 37.6% 39.2% 20.5% 19.3%
Price earnings ratio 16.1 22.6 12.2 18.2 9.7
Interest coverage (10) 2.9 2.0 3.6 6.2 13.6
- ------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
- ----------
Number of common shares
outstanding (in thousands):
Average - on a diluted basis 72,581 69,595 69,461 69,435 71,911
Year-end 69,640 69,465 69,382 69,289 69,232
Number of stockholders (year-end) 12,032 12,542 12,454 12,521 12,128
Number of employees (year-end) 37,886 36,157 39,411 29,110 30,301
Total return to shareholders
(five year annualized) (11) 6.7% 2.8% 11.3% 4.4% 6.2%
</TABLE>
(1) Restructuring and special operating charges were $405 million in 1997, $30
million in 1996, and $250 million in 1994. See Note 10.
(2) The Company's financial services business was discontinued in 1997 and the
kitchen cabinet business was discontinued in 1988.
(3) Includes cumulative effect of accounting changes: 1993-Accounting for
postretirement benefits other than pensions of ($180) million or ($2.42)
per diluted share and 1987 - Accounting for income taxes of $11 million or
$0.15 per diluted share.
(4) Excluding non-recurring items, selected 1997 Key Ratios would be as
follows: a) Operating profit margin 4.7%, b) Pre-tax margin 2.7%, c) Net
margin 2.6%, d) Return on average stockholders' equity 12.0%, e) Return on
average total assets 2.7%, and f) Interest coverage 3.0%.
(5) Earnings from continuing operations before income taxes and other items,
as a percent of sales.
(6) Earnings from continuing operations before accounting change, as a percent
of sales.
(7) Net earnings before accounting change divided by average stockholders'
equity.
(8) Net earnings before accounting change, plus minority interest divided by
average total assets.
(9) Debt less cash and equivalents divided by debt, stockholders' equity and
minority interests less cash and equivalents.
(10) Ratio of earnings from continuing operations (before income taxes,
accounting change and interest expense) to interest expense.
(11) Stock appreciation plus reinvested dividends.
45
<PAGE>
Subsidiaries
------------
<TABLE>
<CAPTION>
Subsidiary and Name Jurisdiction In
Under Which It Does Business Which Organized
- ---------------------------- ---------------
<S> <C>
Whirlpool Europe B.V. The Netherlands
Whirlpool Properties, Inc. Michigan
Whirlpool Financial Corporation Delaware
Brasmotor S.A. Brazil
</TABLE>
The names of the Company's other subsidiaries are omitted because, considered
in the aggregate as a single subsidiary, such subsidiaries would not constitute
a significant subsidiary as of December 31, 1997.
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Consent of Ernst & Young LLP
The Board of Directors
Whirlpool Corporation
- --------------------------------------------------------------------------------
Benton Harbor, Michigan
We consent to the incorporation by reference in Registration Statement Nos.
33-34490, 33-34037, 33-21360, 33-00201, 2-64261, 33-05904, 33-40249, 33-43823,
333-02827 and 333-02825 of Whirlpool Corporation and Registration Statement Nos.
33-26680 and 33-53196 of Whirlpool Corporation and Whirlpool Savings Plan of our
report dated January 26, 1998, with respect to the consolidated financial
statements and schedule of Whirlpool Corporation, included in this Annual Report
(Form 10-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Chicago, Illinois
March 17, 1998
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement nos. 33-34490, 333-34037, 33-21360, 33-00201, 2-64261, 33-05904, 33-
40249, 33-43823, 33-02827 and 333-02825 of Whirlpool Corporation and
Registration Statement nos. 33-26680 and 33-53196 of Whirlpool Corporation and
Whirlpool Savings Plan of our reports dated January 23, 1998 with respect to the
consolidated financial statements of Brasmotor S.A. and its subsidiaries,
Multibras S.A. Eletrodomesticos and its subsidiaries and Empresa Brasileira de
Compressores S.A. - EMBRACO and its subsidiaries, included in this Annual Report
(Form 10-K) for the year ended December 31, 1997.
/s/ Price Waterhouse
Price Waterhouse
Auditores Independentes
Sao Paulo, Brazil
March 18, 1998
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both, of WHIRLPOOL CORPORATION, a Delaware corporation
(hereinafter called the "Corporation"), does hereby constitute and appoint DAVID
R. WHITWAM, WILLIAM D. MAROHN, RALPH F. HAKE, and DANIEL F. HOPP, with full
power to each of them to act alone, as the true and lawful attorneys and agents
of the undersigned, with full power of substitution and resubstitution to each
of said attorneys, to execute, file or deliver any and all instruments and to do
all acts and things which said attorneys and agents, or any of them, deem
advisable to enable the Corporation to comply with the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, and any
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing under said Securities Exchange Act of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997,
including specifically, but without limitation of the general authority hereby
granted, the power and authority to sign his or her name as a director or
officer, or both, of the Corporation, as indicated below opposite his or her
signature, to the Annual Report on Form 10-K, or any amendment, post-effective
amendment, or papers supplemental thereto to be filed in respect of said Annual
Report; and each of the undersigned does hereby fully ratify and confirm all
that said attorneys and agents, or any of them, or the substitute of any of
them, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these
presents, as of the 17th day of February, 1998.
Name Title
/s/ David R. Whitwam
- --------------------------- Director, Chairman of the Board and
David R. Whitwam Chief Executive Officer
(Principal Executive Officer)
/s/ William D. Marohn
- --------------------------- Director and Vice Chairman
William D. Marohn
/s/ Ralph F. Hake
- --------------------------- Senior Executive Vice President of Operations
Ralph F. Hake and Chief Financial Officer
(Principal Financial Officer)
/s/ Mark E. Brown
- --------------------------- Vice President and Controller
Mark E. Brown (Principal Accounting Officer)
<PAGE>
<TABLE>
<S> <C>
/s/ Robert A. Burnett
- ------------------------
Robert A. Burnett Director
/s/ Herman Cain
- ------------------------
Herman Cain Director
/s/ Gary T. DiCamillo
- ------------------------
Gary T. DiCamillo Director
/s/ H. Miguel Etchenique
- ------------------------
H. Miguel Etchenique Director
/s/ Allan D. Gilmour
- ------------------------
Allan D. Gilmour Director
/s/ Kathleen J. Hempel
- ------------------------
Kathleen J. Hempel Director
/s/ Arnold G. Langbo
- ------------------------
Arnold G. Langbo Director
/s/ Miles L. Marsh
- ------------------------
Miles L. Marsh Director
/s/ Philip L. Smith
- ------------------------
Philip L. Smith Director
/s/ Paul G. Stern
- ------------------------
Paul G. Stern Director
/s/ Janice D. Stoney
- ------------------------
Janice D. Stoney Director
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
1997 10-K Whirlpool Corp. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 578
<SECURITIES> 0
<RECEIVABLES> 1565
<ALLOWANCES> 156
<INVENTORY> 1170
<CURRENT-ASSETS> 4281
<PP&E> 5262
<DEPRECIATION> 2887
<TOTAL-ASSETS> 8270
<CURRENT-LIABILITIES> 3676
<BONDS> 1074
0
0
<COMMON> 82
<OTHER-SE> 1689
<TOTAL-LIABILITY-AND-EQUITY> 8270
<SALES> 8617
<TOTAL-REVENUES> 8617
<CGS> 6604
<TOTAL-COSTS> 8229
<OTHER-EXPENSES> 377
<LOSS-PROVISION> 160
<INTEREST-EXPENSE> 168
<INCOME-PRETAX> (171)
<INCOME-TAX> (9)
<INCOME-CONTINUING> (46)
<DISCONTINUED> 31
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
1996 10-K Whirlpool Corp. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 129
<SECURITIES> 0
<RECEIVABLES> 2,366
<ALLOWANCES> 58
<INVENTORY> 1,034
<CURRENT-ASSETS> 3,812
<PP&E> 3,839
<DEPRECIATION> 2,041
<TOTAL-ASSETS> 8,015
<CURRENT-LIABILITIES> 4,022
<BONDS> 955
0
0
<COMMON> 81
<OTHER-SE> 1,845
<TOTAL-LIABILITY-AND-EQUITY> 8,015
<SALES> 8,523
<TOTAL-REVENUES> 8,523<F1>
<CGS> 6,623
<TOTAL-COSTS> 8,180<F1>
<OTHER-EXPENSES> 65
<LOSS-PROVISION> 63
<INTEREST-EXPENSE> 155<F1>
<INCOME-PRETAX> 100<F1>
<INCOME-TAX> 70<F1>
<INCOME-CONTINUING> 141<F1>
<DISCONTINUED> 15<F1>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156
<EPS-PRIMARY> 2.10<F1>
<EPS-DILUTED> 2.08<F1>
<FN>
<F1> Restated from prior submission
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
1995 10-K Whirlpool Corp. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 149
<SECURITIES> 0
<RECEIVABLES> 2,117
<ALLOWANCES> 81
<INVENTORY> 1,029
<CURRENT-ASSETS> 3,541
<PP&E> 3,662
<DEPRECIATION> 1,883
<TOTAL-ASSETS> 7,800
<CURRENT-LIABILITIES> 3,829
<BONDS> 983
0
0
<COMMON> 81
<OTHER-SE> 1,796
<TOTAL-LIABILITY-AND-EQUITY> 7,800
<SALES> 8,163
<TOTAL-REVENUES> 8,163<F1>
<CGS> 6,245
<TOTAL-COSTS> 7,766<F1>
<OTHER-EXPENSES> 31
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 129<F1>
<INCOME-PRETAX> 214<F1>
<INCOME-TAX> 90<F1>
<INCOME-CONTINUING> 195<F1>
<DISCONTINUED> 14<F1>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209
<EPS-PRIMARY> 2.83<F1>
<EPS-DILUTED> 2.78<F1>
<FN>
<F1> Restated from prior submission
</FN>
</TABLE>
