<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998.
Commission file number 1-3932
WHIRLPOOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-1490038
(State of incorporation) (I.R.S. Employer Identification No.)
2000 M-63
Benton Harbor, Michigan 49022-2692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 616/923-5000
The registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No_____
-----
Number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date:
Class of common stock Shares outstanding at March 31, 1998
--------------------- ------------------------------------
Common stock, par value $1 per share 75,544,984
PAGE 1 OF 27
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
WHIRLPOOL CORPORATION
---------------------
Quarter Ended March 31, 1998
INDEX OF INFORMATION INCLUDED IN REPORT
Page
----
PART I - FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Statements
of Earnings 3
Consolidated Condensed Balance Sheets 4
Consolidated Condensed Statements
of Changes in Equity 5
Consolidated Condensed Statements
of Cash Flows 6
Notes to Consolidated Condensed
Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 11
PART II - OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 16
2
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
WHIRLPOOL CORPORATION AND SUBSIDIARIES
FOR THE PERIOD ENDED MARCH 31
(millions of dollars except share and dividend data)
<TABLE>
<CAPTION>
First Quarter
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net sales $2,464 $1,990
EXPENSES:
Cost of products sold 1,870 1,536
Selling and administrative 416 373
Intangible amortization 9 8
--------- ----------
2,295 1,917
--------- ----------
OPERATING PROFIT 169 73
OTHER INCOME (EXPENSE):
Interest and sundry income (expense) 40 (5)
Interest expense (63) (35)
--------- ----------
EARNINGS BEFORE INCOME TAXES
AND OTHER ITEMS 146 33
Income taxes 56 16
--------- ----------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE EQUITY EARNINGS AND MINORITY INTERESTS 90 17
Equity in earnings of affiliated companies - 22
Minority interests (22) 4
--------- ----------
EARNINGS FROM CONTINUING OPERATIONS 68 43
Earnings from discontinued operations less applicable taxes 12 3
--------- ----------
NET EARNINGS $ 80 $ 46
========= ==========
Per share of common stock:
Basic earnings from continuing operations $ .91 $ .57
Basic net earnings $ 1.06 $ .62
Diluted earnings from continuing operations $ .90 $ .57
Diluted net earnings $ 1.05 $ .62
Cash dividends $ .34 $ .34
========= ==========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(millions of dollars)
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
(Unaudited) (Audited)
----------- ------------
<S> <C> <C>
ASSETS
Current Assets
- - --------------
Cash and equivalents $ 618 $ 578
Trade receivables, less allowances of
(1998: $102 ;1997: $156 ) 1,662 1,565
Inventories 1,174 1,170
Prepaid expenses and other 197 191
Deferred income taxes 226 215
Net assets of discontinued operations 60 562
----------- ------------
Total Current Assets 3,937 4,281
Other Assets
- - ------------
Investment in affiliated companies 103 100
Intangibles, net 919 916
Deferred income taxes 224 220
Other 340 378
----------- ------------
1,586 1,614
Property, Plant and Equipment
- - -----------------------------
Land 95 92
Buildings 908 969
Machinery and equipment 4,314 4,201
Accumulated depreciation (2,947) (2,887)
----------- ------------
2,370 2,375
----------- ------------
Total Assets $7,893 $8,270
=========== ============
March 31 December 31
1998 1997
(Unaudited) (Audited)
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
- - -------------------
Notes payable $ 964 $1,332
Accounts payable 931 987
Employee compensation 215 265
Accrued expenses 829 858
Restructuring costs 174 212
Current maturities of long-term debt 17 22
----------- ------------
Total Current Liabilities 3,130 3,676
Other Liabilities
- - -----------------
Deferred income taxes 194 190
Postemployment benefits 607 598
Other liabilities 196 188
Long-term debt 1,151 1,074
----------- ------------
2,148 2,050
Minority Interests 787 773
Stockholders' Equity
- - --------------------
Common stock 82 82
Paid-in capital 293 280
Retained earnings 1,855 1,801
Unearned restricted stock (4) (6)
Cumulative translation adjustments (159) (149)
Treasury stock - at cost (239) (237)
----------- ------------
Total Stockholders' Equity 1,828 1,771
----------- ------------
Total Liabilities and Stockholders' Equity $7,893 $8,270
=========== ============
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY
WHIRLPOOL CORPORATION AND SUBSIDIARIES
FOR THE QUARTER ENDED MARCH 31
(millions of dollars)
<TABLE>
<CAPTION>
Accumulated Other
Retained Comprehensive Common Treasury Stock/
Total Earnings Income Stock Paid-in-Capital
------- -------- ----------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Beginning balance, January 1, 1997 $1,926 $1,918 $ (76) $81 $ 3
Comprehensive income
Net income 46 46
Other comprehensive income, net of tax
Foreign currency translation adjustments (77)
Hedge adjustment 41
-------
Other comprehensive income, net of tax (36) (36)
-------
Comprehensive income, net of tax 10
=======
Common stock issued 1 1
Dividends declared on common stock (25) (25)
------- -------- ------------- ------ -------------
Ending balance, March 31, 1997 $1,912 $1,939 $(112) $81 $ 4
======= ======== ============= ====== =============
Beginning balance, January 1, 1998 $1,771 $1,801 $(149) $82 $37
Comprehensive income
Net income 80 80
Other comprehensive income, net of tax
Foreign currency translation adjustments (22)
Hedge adjustment 12
-------
Other comprehensive income, net of tax (10) (10)
-------
Comprehensive income, net of tax 70
=======
Common stock issued 13 13
Dividends declared on common stock (26) (26)
------- -------- ------------- ------ -------------
Ending balance, March 31, 1998 $1,828 $1,855 $(159) $82 $50
======= ======== ============= ====== =============
See notes to consolidated condensed financial statements.
</TABLE>
5
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
WHIRLPOOL CORPORATION AND SUBSIDIARIES
FOR THREE MONTHS ENDED MARCH 31
(millions of dollars)
<TABLE>
<CAPTION>
1998 1997
------ -------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 80 $ 46
Equity in net earnings of affiliated
companies, less dividends received - (13)
Gain on dispositions (20) -
Depreciation and amortization 115 91
Provision for doubtful accounts - 8
Restructuring spending (33) (6)
Change in receivables (112) (75)
Change in inventories (30) (33)
Change in payables (41) (42)
Other operating activities (24) (9)
------- -------
CASH USED FOR OPERATING ACTIVITIES (65) (33)
INVESTING ACTIVITIES
Net additions to properties (94) (41)
Financing receivables originated and leasing assets purchased - (1,039)
Principal payments received on financing
receivables and leases - 1,026
Acquisition of businesses, less cash acquired (18) -
Business dispositions 522 -
Other investing activities - (11)
------- -------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 410 (65)
FINANCING ACTIVITIES
Proceeds of short-term borrowings 5,705 9,632
Repayments of short-term borrowings (6,077) (9,363)
Proceeds of long-term debt 126 28
Repayments of long-term debt (31) (139)
Repayments of non-recourse debt - (6)
Dividends (26) (25)
Other financing activities (2) (6)
------- -------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (305) 121
------- -------
INCREASE IN CASH AND EQUIVALENTS 40 22
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 578 129
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 618 $ 151
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial statements present
information in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and applicable
rules of Regulation S-X. Accordingly, they do not include all information or
footnotes required by generally accepted accounting principles for complete
financial statements. Management believes the financial statements include all
normal recurring accrual adjustments necessary for a fair presentation.
Operating results for the three months ended March 31, 1998 do not necessarily
indicate the results that may be expected for the full year. For further
information, refer to the consolidated financial statements and notes thereto
included in the company's annual report for the year ended December 31, 1997.
In 1997 and prior years, the company's Brazilian subsidiaries had used the U.S.
dollar as their functional currency due to the high level of inflation in the
Brazilian economy. Because the inflation rate has declined significantly over a
number of years, the Brazilian economy has ceased to be considered highly
inflationary and the functional currency for all of the Brazilian operations was
changed to the local currency as of January 1, 1998.
NOTE B--BUSINESS ACQUISITIONS & DISPOSITIONS
In March 1998, the company increased its majority ownership interest in
Whirlpool Narcissus Co., its Chinese joint venture that manufactures washing
machines, for about $12 million in cash.
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, an approximately $1.6 billion appliance company
with 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 C for
further explanation.
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.
7
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Whirlpool Argentina's annual sales and earnings are not significant to the
company's consolidated results of operations.
NOTE C--DISCONTINUED OPERATIONS
In January 1998, the company sold to Transamerica Distribution Finance
Corporation ("TDF") additional international assets and consumer financing
receivable assets for approximately $370 million. The company recorded a pretax
gain of $20 million ($11 million after-tax) in the first quarter of 1998 related
to the completion of the TDF transactions. In addition, the company completed
the sale of certain aerospace financing assets for $131 million; no gain or loss
related to these sales was recorded in 1998. As of March 31, 1998, $60 million
of aerospace and international financing assets are held as discontinued
operations pending the completion of sales transactions.
During the third quarter of 1997, the company discontinued its financing
operations and reached an agreement to sell the majority of WFC's assets in a
series of transactions to 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. 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. The company recorded a
pretax gain of $70 million ($42 million after-tax) related to these transactions
in the fourth quarter of 1997.
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.
Income taxes related to discontinued operations - Expense / (Income):
<TABLE>
<CAPTION>
Three Months
Ended March 31
---------------------
<S> <C>
(millions of dollars)
1998 $9
1997 $4
</TABLE>
8
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
-------- -----------
(millions of dollars)
<S> <C> <C>
Finished products $ 1,062 $ 1,015
Raw materials and work in process 329 373
-------- --------
Total FIFO cost 1,391 1,388
Less excess of FIFO cost
over LIFO cost 217 218
-------- --------
$ 1,174 $ 1,170
======== ========
</TABLE>
NOTE E--AFFILIATED COMPANIES
Equity in the net earnings (loss) of affiliated companies is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
------------------
(millions of dollars)
<S> <C> <C>
Brazilian affiliates $ - $ 23
Mexican affiliate - (1)
Other - -
------ ------
$ - $ 22
====== ======
</TABLE>
In November 1997, the company increased its voting ownership in its Brazilian
affiliate, Brasmotor S.A., from 33% to 66% (Refer to Note B -- Business
Acquisitions and Dispositions). 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.
9
<PAGE>
WHIRLPOOL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE F--GEOGRAPHIC SEGMENTS
(millions of dollars)
<TABLE>
<CAPTION>
Three Months North Latin Other and Total
Ended March 31 America Europe America Asia (Eliminations) Whirlpool
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales
1998 $ 1,342 $ 550 $ 556 $ 83 $ (67) $ 2,464
1997 $ 1,289 $ 582 $ 65 $ 121 $ (67) $ 1,990
Operating Profit
1998 $ 107 $ 21 $ 47 $ (6) $ - $ 169
1997 $ 86 $ 2 $ 1 $ (14) $ (2) $ 73
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The statements of earnings summarize operating results for the three months
ended March 31, 1998 and 1997. This section of Management's Discussion
highlights the main factors affecting the changes in operating results. 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 1998 and the last two months of 1997.
Net Sales
- - ---------
Net sales were $2.5 billion for the first quarter of 1998, an increase of 24%
compared to the prior year. Excluding the impact of consolidating Brasmotor and
currency fluctuations, revenues were up slightly year over year. North American
unit volumes were up 12% in the first quarter compared to the prior year, in an
industry that was up 6%, while sales were 6% higher than the prior year. North
American industry shipments are expected to be up about 2% for the full year.
European sales in U.S. dollars were down 3% compared to the prior year, but were
up 6%, excluding currency fluctuations, due to higher volumes and improved
product and brand mix that is driving higher average sales value. European
industry shipments are expected to be up 3% for the full year.
Expenses
- - --------
Gross margin percentage on products sold to net sales improved by 1.3 percentage
points for the first quarter compared to 1997, stemming from the benefits of the
restructuring started in 1997 and manufacturing efficiencies and reduced
material costs in both North America and Europe, partially offset by pricing
deterioration in North America.
Appliance selling and administrative expenses as a percent of net sales
decreased by 1.8 percentage points for the first quarter compared to 1997 due to
cost reduction initiatives and the consolidation of Brasmotor, which has a lower
level of these expenses relative to sales. North American expenses as a percent
of net sales decreased slightly. European expenses as a percent of net sales
improved 2.1 percentage points due to reduced costs mainly from restructuring
and advertising spending.
Other Income and Expense
- - ------------------------
Interest and sundry income (expense) was $45 million favorable to the first
quarter of 1997 due to the inclusion of interest income from the company's
Brazilian operations, which typically hold larger balances of cash equivalents
relative to the size of the business. Partly offsetting this was the $28 million
increase in interest expense, which was also driven by the consolidation of the
company's Brazilian operations.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Income Taxes
- - ------------
The consolidated effective income tax rate was 38% for the first quarter
compared to 49% for the comparable period in 1997 and a (5)% annual 1997 rate.
The reduction from the prior year's first quarter rate reflects the
consolidation of Brasmotor and the improved profitability in Europe and Asia in
1998. The (5)% annual 1997 rate was caused by the restructuring and other non-
recurring charges in 1997, for which the related tax benefits were at an average
rate lower than the U.S. statutory tax rate.
Equity in Affiliated Companies
- - ------------------------------
Equity earnings in affiliated companies were minimal in the first quarter of
1998 compared to $22 million in 1997 due to the consolidation of Brasmotor
starting in the last two months of 1997.
Discontinued Operations
- - -----------------------
The company recorded a gain of $20 million pre-tax, $11 million after-tax, in
the first quarter related to the sale of certain consumer financing and European
inventory financing assets to Transamerica Distribution Finance Corporation
("TDF"). These transactions continued a series of sales to TDF resulting from
the company's decision in the third quarter of 1997 to discontinue its financing
operations. The remaining sales of additional European inventory financing
assets are expected to close in the second quarter.
Refer to Note C to the accompanying consolidated financial statements for a
discussion of discontinued operations.
Net Earnings
- - ------------
First quarter earnings from continuing operations were $68 million or $.90 per
diluted share compared to $43 million or $.57 per diluted share in 1997. First
quarter net earnings were $80 million or $1.05 per diluted share compared to $46
million or $.62 per diluted share in 1997.
CASH FLOWS
The statements of cash flows reflect the changes in cash and equivalents for the
three months ended March 31, 1998 and 1997 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.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Cash used by operating activities in the first three months of 1998 was $65
million compared to $33 million used in 1997, reflecting seasonal working
capital needs of the appliance business and higher restructuring spending,
partially offset by higher earnings.
Investing Activities
- - --------------------
The principal recurring investing activities are property additions. Net
property additions for the first three months were $94 million in 1998 increased
from $41 million in 1997 due to the consolidation of Brasmotor. These
expenditures are primarily for equipment and tooling related to product
improvements, more efficient production methods and replacement for normal wear
and tear.
Refer to Note B to the accompanying consolidated financial statements for a
discussion of business dispositions and acquisitions.
Financing Activities
- - --------------------
Dividends to shareholders totaled $26 million for the first quarter of 1998 and
$25 million for 1997.
The company's borrowings decreased by $277 million during the first quarter of
1998, excluding the effect of currency fluctuations, resulting primarily from
proceeds related to the WFC asset sales.
FINANCIAL CONDITION AND OTHER MATTERS
The financial position of the company remains strong as evidenced by the March
31, 1998 balance sheet. The company's total assets are $7.9 billion and
stockholders' equity is $1.8 billion.
The overall debt to invested capital ratio of 36.7% at March 31, 1998 was down
from 42.1% at December 31, 1997 due to the ongoing disposition of assets related
to the discontinued financing operations. The company's debt continues to be
rated investment grade by Moody's Investors Service Inc., Standard and Poor's
and Duff & Phelps.
Various European currency swaps and forward contracts serve as a hedge of net
foreign currency cash flows and also hedge a portion of the company's European
net assets. Changes in the value of the swaps and forward contracts due to
movements in exchange rates are included in the currency translation component
of stockholders' equity if they relate to the European net hedge or otherwise in
other income (expense).
The company has external sources of capital available and believes it has
adequate financial resources and liquidity to meet anticipated business needs
and to fund future growth opportunities such as new products, acquisitions and
joint ventures.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
BUSINESS UNIT NET SALES AND OPERATING PROFIT
The following data is presented as supplemental information (in millions):
Net Sales by Business Unit were as follows:
<TABLE>
<CAPTION>
First Quarter Better/(Worse)
--------------------- ---------------------
1998 1997 $ %
-------- -------- -------- --------
<S> <C> <C> <C> <C>
North America $ 1,336 $ 1,260 $ 76 6%
Europe 540 560 (20) (4)
Latin America 546 60 486 N/M
Asia 68 113 (45) (40)
Other (26) (3) (23) N/M
-------- -------- -------- --------
Total Appliance Business $ 2,464 $ 1,990 $ 474 24%
======== ======== ======== ========
</TABLE>
Operating Profit by Business Unit was as follows:
<TABLE>
<CAPTION>
First Quarter Better/(Worse)
--------------------- ---------------------
1998 1997 $ %
-------- -------- -------- --------
<S> <C> <C> <C> <C>
North America $ 147 $ 128 $ 19 15%
Europe 22 4 18 N/M
Latin America 47 1 46 N/M
Asia (8) (15) 7 47
Other (39) (45) 6 13
-------- -------- -------- --------
Total Appliance Business $ 169 $ 73 $ 96 132%
======== ======== ======== ========
</TABLE>
For commentary regarding performance in North America and Europe, refer to
"Results of Operations." Other consists of corporate expenses and eliminations.
Latin America sales and operating profit reflect the consolidation of Brasmotor
beginning in November 1997. Prior to that date, the company's Brazilian
operations were accounted for as equity affiliates. First quarter appliance
shipments for the company's Brazilian operations were down 14% from 1997 while
the Brazilian appliance industry was down 17% due to economic conditions in
Brazil. The company's after-tax share of the benefits from a Brazilian
government export incentive program (Befiex) was about $7 million in the first
quarter of 1998. This program is scheduled to end in July 1998.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
In December 1996, a favorable decision was obtained by Multibras S.A.
Eletrodomesticos (Multibras) and Empresa Brasileira de Compresorres S.A.
(Embraco) with respect to additional export incentives in connection with the
Befiex program. In April 1997, Multibras and Embraco submitted tax-credit claims
for about 447 million reals (equivalent to US$440 million as of December 1996)
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
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.
Asia had lower unit volumes and sales compared to the prior year due to the
closure of two factories in 1997 and worse economic conditions in the region.
The first quarter operating loss in the region was lower than 1997 due to the
restructuring plan implemented in late 1997.
15
<PAGE>
PART II. OTHER INFORMATION
--------------------------
WHIRLPOOL CORPORATION AND SUBSIDIARIES
Quarter Ended March 31, 1998
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
a. The following are included herein:
(10) Material Contracts -- Employment Agreement with Paulo P.M.O.
Periquito, Executive Vice President, Latin American Region
(11) Computation of earnings per share
(27) Financial Data Schedule
(99) Computation of the ratios of earnings to fixed charges
b. The registrant filed the following Current Reports on Form 8-K for the
quarterly period ended March 31, 1998:
A Current Report on Form 8-K dated January 2, 1998 pursuant to Item 5,
"Other Events," concerning the Company's announcement that it had completed
the previously announced sale of the consumer finance business of Whirlpool
Financial Corporation to Transamerica Distribution Finance Corporation.
A Current Report on Form 8-K dated January 13, 1998 pursuant to Item 5,
"Other Events," concerning the Company's announcement that (i) it would
take a charge of approximately $44 million (pretax) against fourth-quarter
earnings in 1997 to reduce costs in its Latin American operations and (ii)
it expected fourth-quarter and full year 1997 earnings to be in line with
analyst expectations.
A Current Report on Form 8-K dated February 3, 1998 pursuant to Item 5,
"Other Events," concerning the Company's reporting fourth-quarter and full-
year earnings for 1997.
16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WHIRLPOOL CORPORATION
(Registrant)
By /s/ Ralph F. Hake
-------------------------------
Ralph F. Hake
Senior Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
May 8, 1998
17
<PAGE>
Exhibit 10
[LOGO OF MULTIBRAS SA] [LOGO OF WHIRLPOOL CORPORATION] [LOGO OF BRASMOTOR]
Substitute of The Labour Contract and other Conditions For the Performance Of
The Job C.E.O. in Multibras S.A. Eletrodomesticos of Mr. Paulo F.M.O. Periquito
In reason of Mr. Paulo Periquito having been elected as Executive Vice-President
as well as, with the need to make adequate the remuneration to levels in use at
Whirlpool Corporation - USA, Multibras S.A. Eletrodomesticos and Mr. Paulo
Periquito have decided and agreed to, constitute this contractual agreement as
substitute to the prior contract and other conditions of the performance of the
job of C.E.O., signed in March 15, 1996.
The conditions herein established in this instrument, substitute, for all legal
rights and effects, and in totality, the conditions that were agreed to on the
labour contract signed in March 15 of 1996.
The conditions now established are the following:
a) JOB
Contracted as General Manager, being immediately thereafter elected as C.E.O.,
in conformity to the Law of Business Corporations (S.A.) no. 6404
<PAGE>
[LOGO OF MULTIBRAS SA] [LOGO OF WHIRLPOOL CORPORATION] [LOGO OF BRASMOTOR]
b) BASIC SALARY
Basic annual salary, as of January 1st., 1998, the equivalent to US 500,000.00
(five hundred thousands dollars), paid in 12 monthly payments during the year.
All salary gains or improvements will be based on the policies in practice at
Whirlpool, in the same conditions in force for all other members of the
Whirlpool Corporation Executive Committee.
c) COLA - COST OF LIVING ALLOWANCE
So as to make adequate the basic salary to the Brazilian reality, as well as not
to bring any loss to the total remuneration, a COLA will be paid monthly, based
on surveyed values established by ORC - Organization Resource Counselors, an
internationally recognized Consultant specialized in proving administrative data
of expatriate remuneration.
The value of the COLA will be reviewed annually, in January of each year, being
that, for the year of 1998 the amount established is of US 100,000.00 (one
hundred thousands dollars) paid in 12 payments during the year.
For 1999 and 2000 it is established and guarantied a minimum value of the COLA
of US 75,000.00 (seventy five thousands dollars).
<PAGE>
d) PERFORMANCE EXCELLENCE PLAN (PEP)
The participation in the Performance Excellence Plan (PEP), in accordance to the
policies in force, and that the target bonus defined is 80% (eighty percent) of
the maximum value of the remuneration level defined for the 28 group, at this
moment, following the others rules of the Whirlpool's system.
e) EXECUTIVE STOCK APPRECIATION PLAN (ESAP)
The participation in the Executive Stock Appreciation Plan (ESAP), in accordance
to the policies in force, and that the target bonus defined is 80% (eighty
percent) of the maximum value of the remuneration level defined for the 28
group, at this moment, following the others rules of the Whirlpool's system.
f) STOCK OPTION PLAN
The participation in Whirlpool's Stock Option Plan, in accordance to the
policies in force, and that presents the following basic characteristics:
Eligibility: from the date of contractual agreement
Concession Period: annual (June of each year)
No. of shares foreseen for annual concession: from 16,500 to 24,500
Period and form to exercise the shares: 50% after 1 year
50% after 2 years
Period of stock contract: 10 years
<PAGE>
g) SPECIAL STOCK CONCESSION (WHIRLPOOL CAREER STOCK PROGRAM)
Special concession, on one only time, of 40,000 (forty thousands) shares in a
program of vesting in the following manner:
- 25% (twenty five percent) after three (3) years
- 50% (fifty percent) after seven (7) years
-100% (one hundred percent) at the date of retirement
h) SPECIAL BONUS
Payment in March 31st. of 1998, of a value equivalent of US 200,000.00 in lieu
of the following two payments established as per contract
US 100,000.00 related to the payment due at March 31st., 1998
US 100,000.00 related to the anticipation of the payment that is due in
March 31st., 1999
i) SPECIAL LOAN FOR ACQUISITION OF SHARES
Multibras S.A. Eletrodomesticos will continue as a guarantor in the personal
loan agreement established between Mr. Paulo Periquito and Banco Bradesco S.A.
until June 28, 1998 when the executive will liquidate the loan.
j) CONTRACTUAL INDEMNITY
The guarantee of a special indemnity, of the value of 13.82 basic monthly
salaries in case of rescission of contract without just cause by the Company's
part.
<PAGE>
k) PENSION FUND
An alteration of the Pension Fund Plan of the "non-founders" category to a
"FOUNDERS" category that presents the following basic characteristics.
Retirement Benefit: 85% of the basic monthly salary (benefit + INSS)
Invalid retirement: 70% of the value of the retirement benefit
Widow's pension: 50% of the value of the retirement benefit
Pension for underage children: 30% of the value of the retirement benefit to the
child (or children) that are underage
Age for retirement: 60 years
Minimum time of participation in the Plan: 10 years
Participation in the cost: 15% of the monthly cost, limited to 8.0% of the basic
salary
l) SPECIAL LIFE INSURANCE
Payment made by the Company, of the total premium of the special life insurance
plan, with the following basic coverage:
natural death: 41.5 (forty one and half) basic monthly salaries, unlimited
accidental death: 83.0 (eighty three) basic monthly salaries, unlimited
<PAGE>
m) DESIGNATED AUTOMOBILE
The designated automobile at the choice of the executive, with a maximum value
limited to R$ 65,000.00 with all expenses paid by the Company and with two (2)
years period of use and then change for a newer model, in accordance to the
policies in force.
n) HOSPITAL AND MEDICAL ASSISTANCE
Hospital and Medical Assistance Plan with free choice of services and
reimbursement of 100% of all expenses incurred (including lawful dependants
foreseen by social security)
o) DENTAL ASSISTANCE
Free choice of dental assistance, with reimbursement of 100% of expenses
incurred (including lawful dependants foreseen by social security)
p) PHARMACEUTICAL ASSISTANCE
Reimbursement of 100% of expenses incurred with the acquisition of
pharmaceuticals (including those made for the lawful dependants foreseen by
social security)
q) ANNUAL INTERNATIONAL TRIP
Payment by the Company, of first class air tickets, once a year, for the
executive and spouse, for an international trip, without a pre-determined
location.
r) PRODUCTS IN DEMONSTRATION
The right to use at home, of a product (home appliance) of each line of products
made by the group, with a trade in period of at least one year.
<PAGE>
s) SOCIAL AND BUSINESS CLUB
Payment by the Company of a title deed of a club, in the Company's name and of
all expenses and taxes for the executive's membership fees in 02 clubs, being
one a social and the other for business purposes
t) ANNUAL MEDICAL CHECK-UP
u) DRIVER
v) DURATION: from January 1st of 1998 on
Sao Paulo, April 2, 1998
/s/ William D. Marohn /s/ H. Miguel Etchenique
William D. Marohn H. Miguel Etchenique
Vice-Chairman Presidente do Conselho de Administracao
Whirlpool Corporation Brasmotor S.A.
/s/ Paulo F.M.O. Periquito /s/ Paulo Roberto Pereira da Costa
Paulo F.M.O. Periquito Paulo Roberto Pereira da Costa
Diretor Superintendente Diretor
Multibras S.A. Eletrodomesticos Brasmotor S.A.
<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(millions of dollars except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------
1998 1997
------ ------
<S> <C> <C>
Basic:
Average Shares Outstanding 75.3 74.4
Earnings:
Continuing Operations $ 68.4 $ 42.5
Discontinued Operations 11.4 3.9
------ ------
Net Earnings $ 79.8 46.4
====== ======
Earnings Per Share from Continuing Operations $ 0.91 $ 0.57
Net Earnings Per Share $ 1.06 $ 0.62
====== ======
Diluted:
Average Shares Outstanding 75.3 74.4
Treasury Stock Method (a):
Stock Options 1.0 0.5
------ ------
Diluted Average Shares Outstanding 76.3 74.9
====== ======
Diluted Earnings:
Continuing Operations $ 68.4 $ 42.5
Discontinued Operations 11.4 3.9
------ ------
Diluted Net Earnings $ 79.8 $ 46.4
====== ======
Diluted Earnings Per Share from Continuing Operations $ 0.90 $ 0.57
Diluted Net Earnings Per Share $ 1.05 $ 0.62
====== ======
</TABLE>
(a) Using the average market price per share of stock for the period.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
First Quarter 10Q for Whirlpool Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 618
<SECURITIES> 0
<RECEIVABLES> 1662
<ALLOWANCES> 102
<INVENTORY> 1174
<CURRENT-ASSETS> 3937
<PP&E> 5317
<DEPRECIATION> 2947
<TOTAL-ASSETS> 7893
<CURRENT-LIABILITIES> 3130
<BONDS> 1151
0
0
<COMMON> 82
<OTHER-SE> 1746
<TOTAL-LIABILITY-AND-EQUITY> 7893
<SALES> 2464
<TOTAL-REVENUES> 2464
<CGS> 1870
<TOTAL-COSTS> 2286
<OTHER-EXPENSES> 9
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (63)
<INCOME-PRETAX> 146
<INCOME-TAX> 56
<INCOME-CONTINUING> 68
<DISCONTINUED> 12
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.05
</TABLE>
<PAGE>
EXHIBIT 99
RATIOS OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
<S> <C>
Pretax earnings $ 146.3
Portion of rents representative
of the interest factor 3.5
Interest on indebtedness 62.7
Amortization of debt expense
and premium .2
WFC preferred stock dividend 1.6
--------
Adjusted income $ 214.3
========
Fixed charges
Portion of rents representative
of the interest factor $ 3.5
Interest on indebtedness 62.7
Amortization of debt expense
and premium 0.2
WFC preferred stock dividend 1.6
--------
$ 68.0
========
Ratio of earnings to
fixed charges 3.15
========
Ratio of earnings to
fixed charges at
March 31, 1997 1.87
========
</TABLE>
