<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K.--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
Commission File No. 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 North M-63, Benton Harbor, 49022-2692
Michigan (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 each 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 No
X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) 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 1, 2000, was
$3,866,139,250.
On March 1, 2000, the registrant had 73,243,737 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
-------- ----------------------
<S> <C>
The Company's Annual Report to Stockholders for the year ended
December 31, 1999 (the "Annual Report") Parts I, II and IV
The Company's proxy statement for the 2000 annual meeting of
stockholders (SEC File No. 1-3932) (the "Proxy Statement") Part III
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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 terms "Company" and
"Whirlpool" include Whirlpool Corporation and its consolidated subsidiaries.
All currency figures are in U.S. dollars.
Financial Information Relating to Operating Segments,
Foreign and Domestic Operations and Export Sales
The Company operates predominantly in the business segment classified as
Major Home Appliances.
During 1999 the Company's U.S. operations sold product into Canada, Mexico,
Latin America, the Caribbean, Asia, Europe, Africa, and the Middle East.
However, export sales by the Company's U.S. operations were less than 10% 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 Annual Report.
Products and Services
The Company manufactures and markets a full line of major home appliances
and related products, primarily for home use. The Company's principal products
are: home laundry appliances, home refrigeration and room air conditioning
equipment, home cooking appliances, home dishwashers, and mixers and other
small household appliances. Less than 10% of the Company's unit sales volume
is purchased from other manufacturers for resale by the Company. The Company
also produces hermetic compressors and plastic components, primarily for the
home appliance and electronics industries.
The following table sets forth information regarding the total revenue
contributed by each class of similar products which accounted for 10% or more
of the Company's consolidated revenue in 1999, 1998, and 1997:
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars) Percent 1999 1998 1997
- -------------------------------------------- ------- ------- ------- ------
<S> <C> <C> <C> <C>
Home Laundry Appliances......................... 29% $ 3,091 $ 2,932 $2,704
Home Refrigeration and Room Air Conditioning
Equipment...................................... 34% $ 3,563 $ 3,622 $2,913
Home Cooking Appliances......................... 16% $ 1,642 $ 1,625 $1,434
Other........................................... 21% $ 2,215 $ 2,144 $1,566
---- ------- ------- ------
Net Sales..................................... 100% $10,511 $10,323 $8,617
==== ======= ======= ======
</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 microwave hood
combinations and a major supplier to Sears of dishwashers, free-standing
ranges, 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
1
<PAGE>
has also been a major outlet for the Company's Whirlpool and KitchenAid brand
products since 1989. In 1999 approximately 18% of the Company's net sales were
attributable to sales to Sears.
Major home appliances are marketed and distributed in the United States
under the Whirlpool, KitchenAid, Roper, and Estate brand names 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. In Mexico the Company's affiliate,
Vitromatic S.A., manufactures and markets major home appliances for sale under
the Whirlpool, Acros, and Supermatic brand names. Refrigerator-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 markets and distributes, through wholly owned sales
entities, its major home appliances under the Whirlpool, Bauknecht, Ignis,
Algor, and Laden brand names and its portable appliances under the KitchenAid
brand name. In addition to its extensive operations in Western Europe, the
Company has sales subsidiaries in Hungary, Poland, the Czech Republic,
Slovakia, Greece, Romania, Bulgaria, Latvia, Estonia, Lithuania, and Morocco
and a representative office in Russia. In certain Eastern European countries
and ex-Soviet states, products bearing the Whirlpool and Ignis brand names are
sold through independent distributors. The Company owns a subsidiary in South
Africa which manufactures refrigerators and freezers and through which it
markets a full line of products under the Whirlpool and KIC brand names.
Whirlpool's European operations also sell products carrying the Whirlpool,
Bauknecht, Ignis, Algor, and Fides brand names to the Company's wholly-owned
sales companies in Asia and majority-owned sales companies in 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 South Asia Sales region based in New
Delhi, which includes India and surrounding markets; the Asia Pacific Sales
region, which includes the ASEAN countries, Korea, Japan, Australia, New
Zealand, Hong Kong, and Taiwan; and the China Sales region through Whirlpool
Narcissus and Whirlpool Shunde. With the exception of the Narcissus and Taiwan
joint ventures, all of these entities are wholly-owned by Whirlpool. The
Company markets and sells its products in Asia under the Whirlpool,
KitchenAid, Bauknecht, and Ignis brand names.
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, and Chile are managed through subsidiaries owned by
Multibras S.A. Eletrodomesticos ("Multibras"), the Company's Brazilian
subsidiary, and in Bolivia, Peru, Paraguay, and Uruguay 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 1999 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
2
<PAGE>
on a wide variety of factors, including principally product features, price,
product quality and performance, service, warranty, advertising, and
promotion.
The Company believes that in Europe it is, in terms of units sold annually,
one of the three largest manufacturers and marketers of major home appliance
products. The Company estimates that during 1999 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 this trend will continue. The Company believes it is in a
favorable position in Europe 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
China, South Korea, and Japan.
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 1999 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 1999 there were approximately 20 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.
As a result of its global expansion, the Company believes it has 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, 1999.
Other Information
The Company has 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 (Empressa
Brasileira de Compressores S.A. (Embraco) and Multibras). The Company has a
minority equity interest in Vitromatic, S.A., a Mexican manufacturer of home
appliances and components. In China the Company has a majority interest in
Whirlpool Narcissus (Shanghai) Company Limited, a joint venture company that
manufactures automatic washing machines for sale and distribution in China and
for export, and a
3
<PAGE>
minority interest in Shenzhen Electra Air-Conditioner Co. Limited, a joint
venture company that manufactures air conditioners. 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 that 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.
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: currency exchange rate fluctuations; 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.
Since the real devaluation in January 1999, the Brazilian economy has been
gradually improving throughout the year. The white goods industry in Brazil
declined in 1999 as a consequence of high interest rates, limited credit
availability, and a high unemployment level. However, the Company's
performance has been superior to market performance, resulting in the
Company's gain in market share. In the foreseeable future, it is expected that
Brazil will experience moderate but steady GDP growth, a trend that began in
the fourth quarter of 1999. The gradual easing of interest rates by the
Brazilian Central Bank is likely to improve demand. Despite an inflation spike
toward the end of 1999, inflation is likely to remain under control given
current economic conditions. The reduction of country risk due to improved
payment balance, reduction in fiscal deficit, and a calm political environment
should result in greater exchange rate stability in the future.
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, the
Company believes 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. In Europe Whirlpool, through its subsidiaries,
is also the owner of a number of trademarks and the foreign registrations
thereof. The most important trademarks owned by the Company in Europe are
Bauknecht, Ignis, and Laden. In Latin America the most important trademarks
owned by the Company are Brastemp, Consul and Eslabon de Lujo. The most
important trademark for the Company's European, Asian, and Latin American
operations is Whirlpool.
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.
4
<PAGE>
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.
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.
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. When laws and regulations are inadequate, the Company has
established and is following its own standards consistent with its commitment
to environmental responsibility.
The Company believes that it is in compliance in all material respects with
all presently applicable federal, state, local, and other governmental
provisions relating to environmental protection in the countries in which it
has manufacturing operations. Capital expenditures and expenses for
manufacturing operations directly attributable to compliance with such
provisions worldwide amounted to approximately $30 million in 1997, $30
million in 1998, and $19 million in 1999. The decrease from 1998 to 1999 is
attributable to the completion of air and water pollution control capital
improvement projects in 1998, as well as benefits from previous pollution
prevention projects. It is estimated that in 2000 environmental capital
expenditures and expenses for manufacturing operations will be approximately
$22 million. Capital expenditures and expenses for product related
environmental activities were not material in any of the past three years and
are not expected to be material in 2000.
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 HCFCs used in refrigeration and energy
standards rulemakings for other selected major appliances produced by the
Company. Compliance with these various standards as they become effective will
require some product redesign.
As in the United States, Whirlpool's European and Latin American operations
are 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 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. In
1999 the Company evaluated its facilities in Brazil and does not anticipate
any material adverse effect upon the Company's earnings or financial condition
from the environmental condition of these facilities.
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. The new system was
implemented in Austria, Brazil, Canada, Germany, and Switzerland in 1998, and
in the United States and the Netherlands in 1999. The project is expected to
be completed within the next two years.
5
<PAGE>
The following table sets forth the names of the Company's executive
officers at December 31, 1999, 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, 1999:
<TABLE>
<CAPTION>
First Became
Name Office an Officer Age
- ---- ------ ------------ ---
<S> <C> <C> <C>
David R. Director, Chairman of the Board and 1983 57
Whitwam Chief Executive Officer
Jeff M. 1993 42
Fettig Director, President and Chief Operating Officer
Mark E. 1999 48
Brown Executive Vice President and Chief Financial Officer
Bengt G. 1999 46
Engstrom Executive Vice President and President, Whirlpool Europe
Daniel F. 1989 52
Hopp Senior Vice President, Corporate Affairs and General Counsel
Ronald L. 1991 56
Kerber Executive Vice President and Chief Technology Officer
Greg A. 1998 50
Lee Senior Vice President, Human Resources
Paulo 1997 53
F.M.
Periquito Executive Vice President and President, Latin America
Michael 1997 51
D.
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 2000 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
---- ---------------- ------
<C> <S> <C>
Greg A. Lee St. Paul Companies December 1992 through May 1998
Senior Vice President, Human Resources
Paulo F.M. Periquito Multibras S.A. Chief Executive Officer March 1996 through present
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, 1999, the principal manufacturing and
service operations of the Company were carried on at 44 locations worldwide,
34 of which are located in 12 countries outside the United States. The Company
occupied a total of approximately 41.7 million square feet devoted to
manufacturing, service, administrative offices, warehouse, distribution, and
sales space. Over 12.4 million square feet of such space is occupied under
lease. In general, all facilities are well maintained, suitably equipped, and
in good operating condition.
ITEM 3. Legal Proceedings.
As of, and during the quarter ended, December 31, 1999, 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 1999.
6
<PAGE>
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 and the
Chicago Stock Exchange.
As of March 1, 2000, the number of holders of record of the Company's
common stock was approximately 12,364.
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 1998 and 1999 are set forth in Note 16
of the Notes to Consolidated Financial Statements in the Annual Report and
incorporated herein by reference.
ITEM 6. Selected Financial Data.
The selected financial data for the five years ended December 31, 1999 with
respect to the following line items are shown under the "Eleven Year
Consolidated Statistical Review" in the Annual Report and incorporated herein
by reference: 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.
See the Management's Discussion and Analysis section of the Annual Report
which is incorporated herein by reference.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
Information with respect to market risk can be found under the caption
"Market Risk" in the Management's Discussion and Analysis section of the
Annual Report which is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the Company are contained in the
Annual Report and incorporated herein by reference. Supplementary financial
information regarding quarterly results of operations (unaudited) for the
years ended December 31, 1999 and 1998 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.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
Information with respect to directors of the Company can be found under the
caption "Directors and Nominees for Election as Directors" in the Company's
Proxy Statement and is incorporated herein by reference. Information with
respect to executive officers of the Company is set forth in Part I of this
report.
7
<PAGE>
ITEM 11. Executive Compensation.
Information with respect to compensation of executive officers and
directors of the Company can be found under the captions "Executive
Compensation" and "Compensation of Directors" in the Proxy Statement and is
incorporated herein by reference.
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% of the Company's stock and by
each director of the Company and all directors and elected officers of the
Company as a group can be found under the caption "Security Ownership" in the
Proxy Statement and is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
Information with respect to certain transactions with executive officers
and directors of the Company and others can be found under the caption
"Certain Transactions" in the Proxy Statement and is incorporated herein by
reference.
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 "Exhibit Index."
(b) Reports on Form 8-K filed during the fourth quarter of 1999.
A current report on Form 8-K for November 4, 1999 pursuant to item 5--
"Other Events" announced that the Company was making a tender offer for the
outstanding publicly traded shares in Brazil of its subsidiaries Multibras
and Brasmotor S.A.
(c) Exhibits.
See attached "Exhibit Index."
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate
section of this report.
8
<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)
Mark E. Brown
By___________________________________
Mark E. Brown
(Principal Financial Officer)
Executive Vice President 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)
Jeff M. Fettig* Director, President and
____________________________________ Chief Operating Officer
Jeff M. Fettig (Principal Operating
Officer)
Mark E. Brown* Executive Vice President and
____________________________________ Chief Financial Officer
Mark E. Brown (Principal Financial
Officer)
Betty A. Beaty* Vice President and
____________________________________ Controller (Principal
Betty A. Beaty Accounting Officer)
Herman Cain* Director March 20, 2000
____________________________________
Herman Cain
Gary T. DiCamillo* Director
____________________________________
Gary T. DiCamillo
Allan D. Gilmour* Director
____________________________________
Allan D. Gilmour
Kathleen J. Hempel* Director
____________________________________
Kathleen J. Hempel
James M. Kilts* Director
____________________________________
James M. Kilts
</TABLE>
9
<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, 2000
____________________________________
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
10
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEMS 14(a) (1) AND (2) AND 14(d)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1999
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, 1999 and 1998
Consolidated statements of earnings--Three years ended December 31,
1999
Consolidated statements of changes in stockholders' equity--Three years
ended December 31, 1999
Consolidated statements of cash flows--Three years ended December 31,
1999
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 LLP, Independent Auditors...................... F-2
Reports of PricewaterhouseCoopers, Independent Auditors................ F-3
Schedule II--Valuation and qualifying account.......................... 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 Charge.......................... 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 6 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>
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, 1999 and 1998, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1999. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the 1998 and 1997 financial
statements of Brasmotor S.A. and its consolidated subsidiaries, which
statements reflect total assets of $2,500 million as of December 31, 1998 and
net earnings of $58 million and $41 million for the years ended December 31,
1998 and 1997, 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
on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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.
In our opinion, based on our audits and, for 1998 and 1997, 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, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
[SIGNATURE]
Chicago, Illinois
January 20, 2000
F-2
<PAGE>
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Brasmotor S.A.
We have audited the accompanying consolidated balance sheets of Brasmotor
S.A. and its subsidiaries as of December 31, 1998 and 1997 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 18, 1999. 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. and Sociedade Financeira de
Grandes Aparatos Domesticos S.A., which statements reflect total assets of
US$149,457 thousand and US$119,549 thousand as of December 31, 1998 and 1997,
respectively, and net earnings of US$6,037 thousand and US$9,487 thousand for
the years ended December 31, 1998 and 1997, 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.
and Sociedade Financeira de Grandes Aparatos Domesticos S.A., is based solely
on the reports of the other auditors.
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.
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.
Up to December 31, 1997, Brazil had 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 as of December 31, 1997, 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. As from January
1, 1998, the functional currency, for the purpose of the translation of the
financial statements into U.S. dollars, has been changed from the U.S. dollar
to the local currency (reais).
F-3
<PAGE>
[PRICEWATERHOUSECOOPERS LETTERHEAD]
Brasmotor S.A.
Page 2
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.
[PRICEWATERHOUSECOOPERS SIGNATURE]
PricewaterhouseCoopers
Auditores Independentes
Sao Paulo, Brazil
January 18, 1999
F-4
<PAGE>
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Empresa Brasileira de Compressores S.A.--EMBRACO
We have audited the accompanying consolidated balance sheets of Empresa
Brasileira de Compressores S.A.--EMBRACO and its subsidiaries as of December
31, 1998 and 1997 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 18, 1999.
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 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.
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. Up to December 31, 1997, Brazil had 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 as of December 31, 1997, 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. As from January 1, 1998, the
functional currency, for the purpose of the translation of the financial
statements into U.S. dollars, has been changed from U.S. dollar to the local
currency (reais).
F-5
<PAGE>
[PRICEWATERHOUSECOOPERS LETTERHEAD]
Empresa Brasileira de Compressores S.A.--EMBRACO
Page 2
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.
[PRICEWATERHOUSECOOPERS SIGNATURE]
PricewaterhouseCoopers
Auditores Independentes
Sao Paulo, Brazil
January 18, 1999
F-6
<PAGE>
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Multibras S.A. Eletrodomesticos
We have audited the accompanying consolidated balance sheets of Multibras
S.A. Eletrodomesticos and its subsidiaries as of December 31, 1998 and 1997 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 18, 1999. 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. and Sociedade Financeira de
Grandes Aparatos Domesticos S.A., which statements reflect total assets of US$
149,457 thousand and US$ 119,549 thousand as of December 31, 1998 and 1997,
respectively, and net earnings of US$ 6,037 thousand and US$ 9,487 thousand for
the years ended December 31, 1998 and 1997, respectively. Those statements were
audited by other auditors whose reports hves been furnished to us, and our
opinion, insofar as it relates to data included for Whirlpool Argentina S.A.
and Sociedade Financeira de Grandes Aparatos Domesticos S.A., is based solely
on the report of the other auditors.
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.
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. Up to December 31, 1997, Brazil had 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 as
of December 31, 1997, 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. As from January 1, 1998, the functional
currency, for the purpose of the translation of the financial statements into
U.S. dollars, has been changed from the U.S. dollar to the local currency
(reais).
F-7
<PAGE>
[PRICEWATERHOUSECOOPERS LETTERHEAD]
Multibras S.A. Eletrodomesticos
Page 2
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.
[PRICEWATERHOUSECOOPERS SIGNATURE]
PricewaterhouseCoopers
Auditores Independentes
Sao Paulo, Brazil
January 18, 1999
F-8
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
Years Ended December 31, 1999, 1998, and 1997
(millions of dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------ -------------------- --------------------------------- ------------ --------------
Additions
---------------------------------
(1) (2)
Balance at Beginning Charged to Costs Charged to Other Deductions-- Balance at End
Description of Period and Expenses Accounts/Other Describe of Period
----------- -------------------- ---------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1999:
Allowances for
doubtful accounts--
trade receivables..... $116 $ 30 $ 22(B) $124
==== ==== ==== ====
Allowances for
doubtful accounts--
financing receivables
and leases............ $ 71 $ 0 $ 59(C) $ 12
==== ==== ==== ====
Accrued expenses--
restructuring costs... $117 $-- $ 78(E) $ 39
==== ==== ==== ====
Year Ended December 31,
1998:
Allowances for
doubtful accounts--
trade receivables..... $134 $ 45 $ 63(B) $116
==== ==== ==== ====
Allowances for
doubtful accounts--
financing receivables
and leases............ $ 90 $ 0 $ 19(C) $ 71
==== ==== ==== ====
Accrued expenses--
restructuring costs... $212 $-- $ 95(E) $117
==== ==== ==== ====
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) $168E) $212
==== ==== === ==== ====
</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 $2 in
1999, $5 in 1998 and $15 in 1997, translation adjustments and transfers.
Note C--The amount for 1998 represents a transfer to the trade receivable
allowance while the amount for 1997 and 1996 represent accounts charged off,
less recoveries of $4 and $3, respectively.
Note D--The amount represents the restructructuring 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>
ANNUAL REPORT ON FORM 10-K
ITEMS 14(a)(3) and 14(c)
EXHIBIT INDEX
YEAR ENDED DECEMBER 31, 1999
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> <S> <C>
3(i) Restated Certificate of Incorporation of the Company
[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] [File No. 1-3932]
3(ii) Amended and Restated By-laws of the Company as
amended August 17, 1999.
4(i) 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.
4(ii) Rights Agreement, dated April 21, 1998, between
Whirlpool Corporation and First Chicago Trust Company
of New York, with exhibits [Incorporated by reference
from Exhibit 4 to the Company's Form 8-K, dated April
22, 1998] [File No. 1-3932]
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
fiscal year ended December 31, 1993] [File No. 1-
3932]
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]
[File No. 1-3932]
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]
[File No. 1-3932]
10(iii) (d) Resolution adopted on December 12, 1989 by the
Board of Directors of the Company adopting a
compensation schedule, life insurance program and
retirement benefit program for eligible
Directors. [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] [File No.1-3932]
10(iii) (e) Resolution adopted on December 8, 1992 by the
Board of Directors of the Company adopting a
Flexible Compensation Program for the
Corporation's nonemployee directors.
[Incorporated by reference from Exhibit
10(iii)(e) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993]
[File No. 1-3932]
10(iii) (f) Whirlpool Corporation Deferred Compensation Plan
for Directors (as amended effective January 1,
1992 and April 20, 1993) [Incorporated by
reference from Exhibit 10(iii)(f) to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993] [File No. 1-
3932]
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Number and Sequential
Description Page
of Exhibit Numbers*
----------- ----------
<C> <S> <C>
10(iii) (g) Form of Agreement providing for severance
benefits for certain executive officers
[Incorporated by reference from Exhibit
10(iii)(g) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993]
[File No. 1-3932]
10(iii) (h) Whirlpool Corporation 1989 Omnibus Stock and
Incentive Plan (as amended June 20, 1995)
[Incorporated by reference from Exhibit
10(iii)(r) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995]
[File No. 1-3932]
10(iii) (i) Whirlpool Corporation Restricted Stock Value
Program (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 fiscal year ended December 31, 1993]
[File 1-3932]
10(iii) (j) Whirlpool Executive Stock Appreciation and
Performance 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]
[File No. 1-3932]
10(iii) (k) Whirlpool Corporation Nonemployee Director Stock
Ownership Plan (as amended February 16, 1999,
effective April 20, 1999 [Incorporated by
reference from Exhibit A to the Company's proxy
statement for the 1999 annual meeting of
stockholders] [File No. 1-3932]
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] [File No. 1-3932]
10(iii) (m) Whirlpool Performance Excellence Plan (as amended
January 1, 1992, February 15, 1994 and April 20,
1999) [Incorporated by reference from Exhibit B
to the Company's proxy statement for the 1999
annual meeting of stockholders] [File No. 1-3932]
10(iii) (n) Whirlpool Corporation Executive Deferred Savings
Plan (as amended effective January 1, 1992)
[Incorporated 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]
[File No. 1-3932]
10(iii) (o) Whirlpool Corporation Executive Officer Bonus
Plan (Effective as of January 1, 1994)
[Incorporated by reference from Exhibit
10(iii)(o) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994]
[File No. 1-3932]
10(iii) (p) Whirlpool Corporation Charitable Award
Contribution and Additional Life Insurance Plan
for Directors (Effective April 20, 1993)
[Incorporated by reference from Exhibit
10(iii)(p) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994]
[File No. 1-3932]
10(iii) (q) Whirlpool Corporation Career Stock Grant Program
(Pursuant to the 1989 Whirlpool Corporation
Omnibus Stock and Incentive Plan) [Incorporated
by reference from Exhibit 10(iii)(q) to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995] [File No. 1-
3932]
10(iii) (r) Whirlpool Corporation 1996 Omnibus Stock and
Incentive Plan (as amended, effective February
16, 1999).
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
Number and Sequential
Description Page
of Exhibit Numbers*
----------- ----------
<C> <S> <C>
10(iii) (s) Whirlpool Corporation 1998 Omnibus Stock and
Incentive Plan (as amended, effective February
16, 1999
11 Statement Re: Computation of Earnings per share
12 Statement Re: Computation of the Ratios of Earnings
to Fixed Charges
13 Management's Discussion and Analysis and Consolidated
Financial Statements contained in Annual Report to
Stockholders for the year ended December 31, 1999
21 List of Subsidiaries
23ii(a) Consent of Ernst & Young LLP
23ii(b) Consent of PricewaterhouseCoopers
24 Powers of Attorney
27 Financial Data Schedules
</TABLE>
- --------
*This information appears only in the manually signed originals of the Form
10-K and conformed copies with exhibits.
E-3
<PAGE>
Exhibit 3(ii)
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 August 17, 1999)
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, and
-1-
<PAGE>
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
-2-
<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 nomination or nominations are to be
made by the stockholders; (d) such other information regarding each nominee
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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
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DIRECTORS
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.
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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 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.
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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.
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,
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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 com-pensation therefor.
ARTICLE IV
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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 commit- tees 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 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.
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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 and Nominating Committee. The Corporate
Governance and Nominating 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 and Nominating
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 practices 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.
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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 Chair- man of the Board, or elsewhere in these by-laws.
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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 direction 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
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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 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
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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.
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 un-
claimed 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
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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 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.
* * * * * * * * *
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Exhibit 10(iii)r
WHIRLPOOL CORPORATION
1996 OMNIBUS STOCK AND INCENTIVE PLAN
(As amended February 16, 1999)
ARTICLE 1
GENERAL
1.1 PURPOSE
Whirlpool Corporation, a Delaware corporation (the "Corporation"), hereby
adopts, subject to stockholder approval, this plan which shall be known as the
WHIRLPOOL CORPORATION 1996 OMNIBUS STOCK AND INCENTIVE PLAN (the "Plan"). The
Corporation and its Subsidiaries are severally and collectively referred to
hereinafter as the "Company." The purpose of the Plan is to foster and promote
the long-term financial success of the Company and materially increase
stockholder value by: (a) strengthening the Company's capability to develop,
maintain, and direct an outstanding management team; (b) motivating superior
performance by means of long-term performance related incentives; (c)
encouraging and providing for obtaining an ownership interest in the Company;
(d) attracting and retaining outstanding executive talent by providing incentive
compensation opportunities competitive with other major companies; and (e)
enabling executives to participate in the long-term growth and financial success
of the Company.
1.2 ADMINISTRATION
(a) The Plan shall be administered by the Human Resources Committee of the Board
of Directors of the Corporation or such other committee of directors as is
designated by the Board of Directors of the Corporation (the "Committee"), which
shall consist of two or more members. Each member shall be a "disinterested
person," as that term is defined by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") or any similar rule which may
subsequently be in effect ("Rule 16b-3") and shall be an "outside director"
within the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of
1986, as it may be amended from time to time (the "Code"). The members shall be
appointed by the Board of Directors, and any vacancy on the Committee shall be
filled by the Board of Directors.
(b) Subject to the limitations of the Plan, the Committee shall have the sole
and complete authority to: (i) select from the regular, full-time employees of
the Company, those who shall participate in the Plan (a "Participant" or
"Participants"); (ii) make awards in such forms and amounts as it shall
determine; (iii) impose such limitations, restrictions and conditions upon such
awards as it shall deem appropriate; (iv) interpret the Plan and adopt, amend,
and rescind administrative guidelines and other rules and regulations relating
to the Plan; (v) correct any defect or omission or reconcile any inconsistency
in this Plan or in any award granted hereunder; and (vi) make all other
determinations and take all other actions deemed necessary or advisable for the
implementation and administration of the Plan. The Committee's determinations on
matters within its authority shall be conclusive and binding upon the Company
and all other persons.
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(c) All expenses associated with the Plan shall be borne by the Corporation
subject to such allocation to its Subsidiaries and operating units as it deems
appropriate.
(d) The Committee may, to the extent that any such action will not prevent the
Plan from complying with Rule 16b-3 or the outside director requirement of Code
Section 162(m), delegate any of its authority hereunder to such persons as it
deems appropriate.
(e) The provisions of this Plan are intended to qualify awards made to certain
Participants (hereinafter identified as "Covered Participants") under the Plan
under the "performance-based" exception to the Code (S)162(m) deduction
limitation.
1.3 SELECTION FOR PARTICIPATION
Participants shall be selected by the Committee from the employees who occupy
responsible managerial or professional positions and who have the capacity to
contribute to the success of the Company. In making this selection and in
determining the form and amount of awards, the Committee may give consideration
to the functions and responsibilities of the employee; the employee's past,
present, and potential contributions to the Company's profitability and sound
growth; the value of the employee's services to the Company; and other factors
deemed relevant by the Committee. Grants may be made to the same individual on
more than one occasion.
1.4 TYPES OF AWARDS UNDER PLAN
Awards under the Plan may be in the form of any one or more of the following:
(a) Statutory stock options ("ISOs", which term shall be deemed to include
Incentive Stock Options as defined in Section 2.5 and any future type of tax-
qualified option which may subsequently be authorized), Non-statutory Stock
Options ("NSOs" and, collectively with ISOs, "Options"), and Stock Appreciation
Rights ("SARs") as described in Article II; (b) Performance Units and
Performance Shares ("Performance Units" and "Performance Shares") as described
in Article III; and (c) Restricted Stock and Restricted Stock Equivalents
("Restricted Stock" and "Restricted Stock Equivalents") as described in Article
IV (collectively, "Awards").
1.5 SHARES SUBJECT TO THE PLAN
Shares of stock covered by Awards under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
$1.00 par value per share, or such other shares as may be substituted pursuant
to Section 6.2 ("Common Stock"). The maximum number of shares of Common Stock
which may be issued for all purposes under the Plan shall be 4 million shares
(subject to adjustment pursuant to Section 6.2). The maximum number of shares of
Common Stock which may be issued pursuant to the exercise of Options awarded
under the Plan shall be 3,750,000 shares (subject to adjustment pursuant to
Section 6.2). Any shares of Common
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Stock subject to an Option which for any reason is canceled (excluding shares
subject to an Option canceled upon the exercise of a related SAR to the extent
shares are issued upon exercise of such SAR) or terminated without having been
exercised, or any shares of Restricted Stock or Performance Shares which are
forfeited, shall again be available for Awards under the Plan. The maximum
number of shares of Common Stock which may be issued pursuant to Restricted
Stock or the cash paid with respect to Restricted Stock Equivalent awards under
the Plan shall be 1,000,000 shares (subject to adjustment pursuant to Section
6.2) or the cash equivalent thereof. No fractional shares shall be issued, and
the Committee shall determine the manner in which fractional share value shall
be treated.
1.6 MAXIMUM AWARDS PER PARTICIPANT
(a) The aggregate number of shares of Common Stock (including any cash
equivalents thereof) that a Covered Participant may receive upon exercise of all
of the Options and SARs awarded to such Covered Participant under the Plan
(including those already exercised by the Covered Participant) shall not exceed
600,000 shares or the cash equivalent thereof.
(b) The aggregate number of (i) all Performance Units and Performance Shares and
(ii) all Restricted Stock and Restricted Stock Equivalents awarded to a Covered
Participant in any calendar year shall not exceed the equivalent of 300,000
shares or the cash equivalent thereof.
1.7 GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine gender
when used in the Plan shall include the feminine gender, the singular shall
include the plural, and the plural shall include the singular.
ARTICLE II
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 AWARD OF STOCK OPTIONS
The Committee may, from time to time, subject to the provisions of the Plan and
such other terms and conditions as the Committee may prescribe, award to any
Participant ISOs and NSOs to purchase Common Stock.
2.2 STOCK OPTION AGREEMENTS
At the discretion of the Committee, an Option awarded under the Plan may be
evidenced by a signed written agreement containing such terms and conditions as
the Committee may from time to time determine.
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2.3 OPTION PRICE
The purchase price of Common Stock under each Option (the "Option Price") shall
be the Fair Market Value of the Common Stock on the date the Option is awarded.
2.4 EXERCISE AND TERM OF OPTIONS
(a) Options awarded under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall approve,
either at the time of grant of such Options or pursuant to a general
determination, and which need not be the same for all Participants, provided
that no such Option shall be exercisable within the first twelve months of its
term. Each Option which is intended to qualify as an ISO pursuant to Section 422
of the Code, and each Option which is intended to qualify as another type of ISO
which may subsequently be authorized by law, shall comply with the applicable
provisions of the Code pertaining to such Options.
(b) The Committee shall establish procedures governing the exercise of Options
and shall require that written notice of exercise be given and that the Option
Price be paid in full in cash (including check, bank draft or money order) at
the time of exercise; provided, however, that such Option Price may be paid
within six business days of the time of exercise, if the Participant instructs
the Corporation to sell shares delivered on exercise as the Participant's agent
pursuant to a "cashless exercise" program or other similar program established
by the Committee. The Committee may permit a Participant, in lieu of part or all
of the cash payment, to make payment in Common Stock already owned by that
Participant, valued at Fair Market Value on the date of exercise, as partial or
full payment of the Option Price; provided, however, that the Committee may, in
any instance, in order to prevent any possible violation of law, require the
Option Price to be paid in cash. As soon as practicable after receipt of each
notice and full payment, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Common Stock.
The exercise of an Option shall cancel any related SAR to the extent of the
number of shares as to which the Option is exercised.
2.5 LIMITATIONS ON ISOs
Notwithstanding anything in the Plan to the contrary, to the extent required
from time to time by the Code, the following additional provisions shall apply
to the grant of Options which are intended to qualify as ISOs (as such term is
defined in Section 422 of the Code):
(a) The aggregate Fair Market Value (determined as of the date the Option is
granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by any Participant during any calendar year
(under all plans of the Company) shall not exceed $100,000 or such other amount
as may subsequently be specified by the Code; provided that, to the extent that
such limitation is exceeded, any excess Options (as determined under the Code)
shall be deemed to be NSOs.
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(b) Any ISO authorized under the Plan shall contain such other provisions as the
Committee shall deem advisable, but shall in all events be consistent with and
contain or be deemed to contain all provisions required in order to qualify the
Options as ISOs.
(c) All ISOs must be granted within ten years from the earlier of the date on
which this Plan was adopted by the Board of Directors or the date this Plan was
approved by the stockholders.
(d) Unless sooner exercised, terminated, or canceled, all ISOs shall expire no
later than ten years after the date of grant.
2.6 TERMINATION OF EMPLOYMENT
In the event the Participant ceases to be an employee with the consent of the
Committee or upon the Participant's death, retirement or disability, each of the
Participant's outstanding Options shall be exercisable by the Participant (or
the Participant's legal representative or designated beneficiary), to the extent
that such Option was then exercisable, at any time prior to an expiration date
established by the Committee at the time of award (which may be the original
expiration date of such Option or such earlier time as the Committee may
establish), but in no event after its respective expiration date; provided that
NSOs may be exercised up to one year after the death of a Participant even if
this is beyond their expiration date. If the Participant ceases to be an
employee for any other reason, all of the Participant's then outstanding Options
shall terminate immediately.
2.7 AWARD OF STOCK APPRECIATION RIGHTS
(a) General. A SAR is a right to receive, without payment (except for applicable
withholding taxes) to the Company, a number of shares of Common Stock, cash, or
a combination thereof, the amount of which is determined pursuant to the formula
set forth in Section 2.7(e). A SAR may be granted (i) with respect to any Option
granted under this Plan, either concurrently with the grant of such Option, or
at such later time as determined by the Committee (as to all or any portion of
the shares of Common Stock subject to the Option); (ii) with respect to any
stock option currently outstanding under other incentive plans of the
Corporation (as to all or any portion of the shares subject to the stock
option), on terms established by the Committee; or (iii) alone, without
reference to any related stock option. Each SAR granted by the Committee under
this Plan shall be subject to the terms and conditions of this Section.
(b) Number. Each SAR granted to any Participant shall relate to such number of
shares of Common Stock as shall be determined by the Committee, subject to
adjustment as provided in Section 6.2. In the case of a SAR granted with respect
to a stock option, the number of shares of Common Stock to which the SAR
pertains shall be reduced in the same proportion that the holder of the option
exercises the related stock option.
(c) Duration. The term of each SAR shall be determined by the Committee but in
no event shall a SAR be exercisable during the first year of its term. Subject
to the foregoing, unless otherwise
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provided by the Committee, each SAR shall become exercisable at such time or
times, to such extent and upon such conditions as the stock option, if any, to
which it relates is exercisable.
(d) Exercise. A SAR may be exercised, in whole or in part, by giving written
notice to the Company, specifying the number of SARs which the holder wishes to
exercise. Upon receipt of such written notice, the Company shall, within 90 days
thereafter, deliver to the exercising holder a certificate for the shares of
Common Stock or cash or both, as determined by the Committee, to which the
holder is entitled. No SAR granted to an Officer may be exercised in whole or in
part for cash except during the period described in Section 6.3(c)(ii)(1)
hereof.
(e) Payment. Subject to the right of the Committee to deliver cash in lieu of
shares of Common Stock, the number of shares of Common Stock which shall be
issuable upon the exercise of a SAR shall be determined by dividing:
(i) the number of shares of Common Stock as to which the SAR is exercised
multiplied by the amount of the appreciation in such shares (for this
purpose, the "appreciation" shall be the amount by which the Fair Market
Value of a share of Common Stock subject to the SAR on the exercise date
exceeds (A) in the case of a SAR related to a stock option, the purchase
price of a share of Common Stock under the stock option or (B) in the case
of a SAR granted alone, without reference to a related stock option, an
amount which shall be determined by the Committee at the time of grant,
provided, however, such amount is at least equal to the Fair Market Value
of the Common Stock on the date the SAR is awarded, (subject to adjustment
under Section 6.2); by
(ii) the Fair Market Value of a share of Common Stock on the exercise
date.
In lieu of issuing shares of Common Stock upon the exercise of a SAR, the
Committee may elect to pay the holder of the SAR cash equal to the Fair Market
Value on the exercise date of any or all of the shares which would otherwise be
issuable. No fractional shares of Common Stock shall be issued upon the exercise
of a SAR; instead, the holder of the SAR shall be entitled to receive a cash
adjustment equal to the same fraction of the Fair Market Value of a share of
Common Stock on the exercise date or to purchase the portion necessary to make a
whole share at its Fair Market Value on the date of exercise.
(f) Agreement. Each SAR awarded by the Committee shall be subject to the
provisions of the Plan and such other terms and conditions as the Committee may
prescribe. At the discretion of the Committee, SARs awarded under the Plan may
be evidenced by a signed written agreement containing such terms and conditions
as the Committee may from time to time determine.
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ARTICLE III
PERFORMANCE SHARES AND UNITS
3.1 AWARD OF PERFORMANCE UNITS AND PERFORMANCE SHARES
The Committee may award to any Participant Performance Shares and Performance
Units ("Performance Awards"). Each Performance Share shall represent one share
of Common Stock. Each Performance Unit shall represent the right of a
Participant to receive an amount equal to the value determined in the manner
established by the Committee at the time of award, which value may, without
limitation, be equal to the Fair Market Value of one share of Common Stock.
3.2 PERFORMANCE UNIT AND PERFORMANCE SHARE AGREEMENTS
Each Performance Award shall be subject to the provisions of the Plan and such
other terms and conditions as the Committee may prescribe. At the discretion of
the Committee, a Performance Award may be evidenced by a signed written
agreement containing such terms and conditions as the Committee may from time to
time determine.
3.3 ESTABLISHMENT OF PERFORMANCE ACCOUNTS
At the time of award, the Company shall establish an account (a "Performance
Account") for each Participant. Performance Units and Performance Shares awarded
to a Participant shall be credited to the Participant's Performance Account.
3.4 PERFORMANCE PERIOD AND TARGETS
(a) The performance period for each award of Performance Shares and Performance
Units shall be of such duration as the Committee shall establish at the time of
award; provided, however, that in no event will the performance period be less
than one year (the "Performance Period"). There may be more than one award in
existence at any one time and Performance Periods may differ.
(b) The Committee shall set performance targets relating to Performance Units
and Performance Shares which shall be based on one or more of the following
performance measures: stock price, market share, increase in sales, earnings per
share, return on equity, cost reductions, economic value added, or any similar
performance measure established by the Committee. Such performance targets shall
be established in writing by the Committee no later than the earlier of (i) 90
days after the commencement of the Performance Period with respect to which the
award of Performance Units or Performance Shares is made and (ii) the date as of
which twenty-five percent (25%) of such Performance Period has elapsed. At the
time of setting performance targets, the Committee shall establish superior and
satisfactory performance targets to be achieved within the Performance Period.
Failure to meet the satisfactory performance target will earn no Performance
Award.
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Performance Awards will be earned as determined by the Committee in respect of a
Performance Period in relation to the degree of attainment of performance
between the superior and satisfactory performance targets.
3.5 PAYMENT RESPECTING PERFORMANCE AWARDS
(a) Performance Awards shall be earned to the extent that their terms and
conditions are met. Notwithstanding the foregoing, Performance Awards and any
other amounts credited to the Participant's Performance Account shall be payable
to the Participant in accordance with the relevant award documents or otherwise
when, if, and to the extent that the Committee determines to make such payment.
All payment determinations shall be made by the Committee during the first four
months following the end of the Performance Period.
(b) The Participant may elect to defer any payment respecting a Performance
Award pursuant to Article V hereof.
(c) Payment for Performance Awards may be made in a lump sum or in installments,
in cash, Common Stock or in a combination thereof as the Committee may
determine.
3.6 TERMINATION OF EMPLOYMENT
In the event the Participant ceases to be an employee before the end of any
Performance Period with the consent of the Committee, or upon the Participant's
death, retirement or disability before the end of any Performance Period, the
Committee, taking into consideration the performance of such Participant and the
performance of the Company over the Performance Period, may authorize the
payment to such Participant (or the Participant's legal representative or
designated beneficiary) of all or a portion of the amount which would have been
paid to the Participant had the Participant continued as an employee to the end
of the Performance Period. In the event a Participant ceases to be an employee
for any other reason, any unpaid amounts for outstanding Performance Periods
shall be forfeited.
ARTICLE IV
RESTRICTED STOCK AND RESTRICTED STOCK EQUIVALENTS
4.1 AWARD OF RESTRICTED STOCK
The Committee may award to any Participant shares of Common Stock, subject to
this Article IV and such other terms and conditions as the Committee may
prescribe (such shares being herein called "Restricted Stock"). Each certificate
for Restricted Stock shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation.
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4.2 RESTRICTED STOCK AGREEMENT
At the discretion of the Committee, Restricted Stock awarded under the Plan may
be evidenced by a signed written agreement containing such terms and conditions
as the Committee may from time to time determine.
4.3 RESTRICTION PERIOD
At the time of award there shall be established for each Participant, subject to
Paragraph 4.6, a restriction period (the "Restriction Period") which shall lapse
(a) upon the completion of a period of time ("Time Goal") as shall be determined
by the Committee, or (b) upon the achievement of stock price goals within
certain time limitations ("Price/Time Goal") as shall be determined by the
Committee, provided that such Time Goal shall last at least until the third year
anniversary of the date of the award or Price/Time Goal shall last at least
until the first year anniversary of the date of the award. Shares of Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise encumbered,
except as hereinafter provided, during the Restriction Period. Except for such
restrictions on transfer, the Participant as owner of such shares of Restricted
Stock shall have all the rights of a holder of Common Stock. With respect to
shares of Restricted Stock which are issued subject to a Time Goal, the
Corporation shall redeliver to the Participant (or the Participant's legal
representative or designated beneficiary) the certificates deposited pursuant to
Section 4.1 at the expiration of the Restriction Period. With respect to shares
of Restricted Stock which are issued subject to a Price/Time Goal, the
Corporation shall redeliver to the Participant (or the Participant's legal
representative or designated beneficiary) the certificates deposited pursuant to
Section 4.1 upon the achievement of the goal on or before the close of the
Restriction Period. With respect to shares of Restricted Stock which are issued
subject to a Price/Time Goal which fail to meet the goal before the end of the
restriction period, all such shares shall be forfeited, and the Corporation
shall have the right to complete a blank stock power in order to return such
shares to the Corporation.
4.4 TERMINATION OF EMPLOYMENT
(a) In the event the Participant ceases to be an employee with the consent of
the Committee or upon the Participant's death, retirement or disability before
the end of the Restriction Period and the Participant has received an award
subject to a Time Goal, the restrictions imposed under this Article IV shall
lapse with respect to such number of those shares subject to a Time Goal as
shall be determined by the Committee, but, in no event less than a number equal
to the product of (a) a fraction, the numerator of which is the number of
completed months elapsed after the date of award of the Restricted Stock subject
to a Time Goal to the Participant to the date of termination and the denominator
of which is the number of months in the Restriction Period multiplied by (b) the
number of shares of Restricted Stock subject to a Time Goal; provided, however,
that notwithstanding the foregoing, no restrictions shall lapse if the
Participant ceases to be an employee prior to the three year anniversary of the
date upon which the award was granted.
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(b) In the event the Participant ceases to be an employee with the consent of
the Committee or upon the Participant's death, retirement or disability before
the end of the Restriction Period and the Participant has received an award
subject to a Price/Time Goal, the restrictions imposed under this Article IV
shall lapse upon the achievement of the Price/Time Goal within two years of the
Participant's termination of employment with respect to such number of those
shares subject to a Price/Time Goal as shall be determined by the Committee,
but, in no event, less than a number equal to the product of (a) a fraction, the
numerator of which is the number of completed months elapsed after the date of
award of the Restricted Stock subject to a Price/Time Goal to the Participant to
the date of termination and the denominator of which is the number of months
elapsed after the date award of the Restricted Stock subject to a Price/Time
Goal to the Participant to the date of achievement of the Price/Time Goal
multiplied by (b) the number of shares of Restricted Stock subject to a
Price/Time Goal; provided, however, that notwithstanding the foregoing, no
restrictions shall lapse if the Participant ceases to be an employee prior to
the first year anniversary of the date upon with the award was granted.
(c) In the event the Participant ceases to be an employee for any other reason,
all shares of Restricted Stock theretofore awarded to that Participant which are
still subject to restrictions shall be forfeited and the Corporation shall have
the right to complete the blank stock power.
4.5 AWARD OF RESTRICTED STOCK EQUIVALENTS
In lieu of or in addition to the foregoing Restricted Stock Awards, the
Committee may award to any Participant restricted stock equivalents, subject to
the terms and conditions of Paragraphs 4.2, 4.3, and 4.4 of this Article IV
being applied to such awards as if those awards were for Restricted Stock and
subject to such other terms and conditions as the Committee may prescribe
("Restricted Stock Equivalents"). Each Restricted Stock Equivalent shall
represent the right of the Participant to receive an amount determined in the
manner established by the Committee at the time of award, which value may,
without limitation, be equal to the Fair Market Value of one share of Common
Stock. Payment for Restricted Stock Equivalents may be made in a lump sum or in
installments, in cash, Common Stock, or in a combination thereof as the
Committee may determine.
4.6 CERTAIN RESTRICTED STOCK AND RESTRICTED STOCK EQUIVALENTS AWARDED TO
COVERED PARTICIPANTS
Any Restricted Stock or Restricted Stock Equivalent awarded to a Covered
Participant which the Committee intends to qualify for the performance-based
exception under Code Section 162(m) shall be subject to a Price/Time Goal. With
respect to any such award, the stock price goals upon which the restrictions
imposed will lapse shall consist of one or more of the following performance
goals: stock price, market share, sales increases, earnings per share, return on
equity, cost reductions, economic value added, or any similar performance
measure established by the Committee. Such measures shall be established in
writing by the Committee no later than the earlier of (a) 90 days after the
commencement of the performance period with respect to which the award of
Restricted
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Stock or restricted stock equivalent is made and (b) the date as of which
twenty-five percent (25%) of such performance period has elapsed.
ARTICLE V
DEFERRAL OF PAYMENTS
5.1 ELECTION TO DEFER
A Participant may elect, with the consent of the Committee, no later than
December 31 of the last full calendar year of the Performance Period, to defer
all or a portion of the Participant's Performance Award within deferral limits
established by the Committee (the "Deferred Amount"). The Committee may permit
amounts now or hereafter deferred or available for deferral under any present or
future incentive compensation program or deferral arrangement of the Company to
be deemed Deferred Amounts and to become subject to the provisions of this
Article. All Deferred Amounts will be subject to such terms and conditions, and
shall accrue such yield thereon (which may be measured by the Fair Market Value
of the Common Stock and dividends thereon) as the Committee may from time to
time establish.
5.2 DEFERRAL PERIOD
The Participant may, with the consent of the Committee, elect to receive payment
of Deferred Amounts and any yield thereon either before or after retirement in a
lump sum or in installments. Upon the death of a Participant, payments of any
amounts hereunder shall be made to the Participant's designated beneficiary
(pursuant to Section 6.13) or estate (in the absence of a designated
beneficiary) in the manner elected by the Participant or (in the event the
Participant made no election) in the manner determined by the Committee. The
period between the date the Participant's Deferred Amount becomes payable and
the final payment of such Deferred Amount hereunder shall be known as the
"Deferral Period."
5.3 PARTICIPANT REPORTS
Annually, each Participant who has a Deferred Amount will receive a report
setting forth all then Deferred Amounts and the yield thereon to date.
5.4 PAYMENT OF DEFERRED AMOUNTS
Unless otherwise agreed by the Corporation and the Participant, payment of
Deferred Amounts may be in cash, Common Stock, or partly in cash and partly in
Common Stock, as the Committee shall determine.
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5.5 ESTABLISHMENT OF TRUST
The Committee, in its sole discretion, may establish a trust to hold Deferred
Amounts or any portion thereof for the benefit of Participants.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 NON-TRANSFERABILITY
Except as provided below, no Award under the Plan (including any Deferred
Amount), and no interest therein, shall be transferable by the Participant
otherwise than by will or, if the Participant dies intestate, by the laws of
descent and distribution. All Awards shall be exercisable or received during the
Participant's lifetime only by the Participant or his legal representative.
Notwithstanding the foregoing, the Committee may from time to time permit awards
to be transferable subject to such terms and conditions as the Committee may
impose. Any transfer contrary to this Section 6.1 will nullify the Award.
6.2 ADJUSTMENTS UPON CERTAIN CHANGES:
In the event of a stock dividend or stock split, or combination or other
increase or reduction in the number of issued shares of Common Stock, the Board
of Directors or the Committee may, in order to prevent the dilution or
enlargement of rights under Awards (including Deferred Amounts), make such
adjustments in the number and type of shares authorized by this Plan, the number
and type of shares covered by, or with respect to which payments are measured
under, outstanding Awards and the exercise prices specified therein as may be
determined to be appropriate and equitable. The Committee may, notwithstanding
any other provision of the Plan to the contrary, provide in the documents
evidencing any Award (including Deferred Amounts) for adjustments to such Award
in order to prevent the dilution or enlargement of rights thereunder or to
provide for acceleration of benefits thereunder in the event of a change in
control, merger, consolidation, reorganization, recapitalization, sale or
exchange of substantially all assets or dissolution of or spin-off or similar
transaction by the Corporation; provided, however, that no such provision shall
require such acceleration of benefits in connection with a change in control as
to any Award (including Deferred Amounts) held by either (a) a Participant who
is an elected officer of the Corporation immediately prior to the transaction or
series of transactions in which the change in control (the "Transaction") is to
occur or (b) any other Participant who is designated by the Committee at the
time the Award is made or subsequently thereto and, in either such case, who
will hold an "Excess Equity Interest" in the Corporation, its successor or any
of its affiliates after such change in control, unless a majority of the
disinterested members of the Board of Directors approves such acceleration prior
to the change in control. An "Excess Equity Interest" means that (i) the
percentage interest in the Common Stock and similar securities of the
Corporation, its successor, or any of its affiliates to be
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beneficially owned by the Participant after the change in control ("Post-Change
Securities") will exceed (A) one-half of one percent (0.5%) and (B) the
percentage interest in the Common Stock of the Corporation beneficially owned by
the Participant immediately prior to the Transaction, such percentages to be
determined on a fully-diluted basis, or (ii) the Participant will receive in
connection with the change in control (in exchange for his Common Stock, as
compensation and otherwise) a greater amount of Post-Change Securities, per
share of Common Stock of the Corporation beneficially owned by him (including
shares which may be acquired under stock options) immediately prior to the
Transaction than stockholders of the Corporation who are not employed by the
Company will have the right to receive, per share of Common Stock of the
Corporation held by such stockholders.
6.3 TAX WITHHOLDING
(a) The Company shall have the power to withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy any withholding or other
tax due from the Corporation with respect to any amount payable and/or shares
issuable under the Plan, and the Corporation may defer such payment or issuance
unless indemnified to its satisfaction.
(b) Subject to the consent of the Committee, due to (i) the exercise of a NSO,
(ii) lapse of restrictions on a Restricted Stock Award, or (iii) the issuance of
any other stock award under the Plan, a Participant may make an irrevocable
election (an "Election") to (A) have shares of Common Stock otherwise issuable
under (i) withheld, or (B) tender back to the Corporation shares of Common Stock
received pursuant to (i), (ii), or (iii), or (C) deliver back to the Corporation
pursuant to (i), (ii), or (iii) previously-acquired shares of Common Stock of
the Corporation having a Fair Market Value sufficient to satisfy all or part of
the Participant's estimated tax obligations associated with the transaction.
Such Election must be made by a Participant prior to the date on which the
relevant tax obligation arises (the "Tax Date"). The Committee may disapprove of
any Election, may suspend or terminate the right to make Elections, or may
provide with respect to any Award under this Plan that the right to make
Elections shall not apply to such Awards.
(c) If a Participant is an officer, as that term is used in Rule 16a-1
promulgated under the Exchange Act or any similar rule which may subsequently be
in effect (an "Officer"), then an Election must be made and must be effective
either (1) during a period beginning on the third business day following the
date of release for publication of the Company's quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date or (2) at least six months prior to the Tax Date.
6.4 CONDITIONS ON AWARDS
In the event that the employment of a Participant holding any unexercised Option
or SAR, any unearned Performance Award, any unearned shares of Restricted Stock,
or any unearned Restricted Stock Equivalents shall terminate with the consent of
the Committee or by reason of retirement or disability, the rights of such
Participant to any such Award shall be subject to the conditions that
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until any such Option or SAR is exercised, or any such Performance Award, share
of Restricted Stock or Restricted Stock Equivalent is earned, the Participant
shall (a) not engage, either directly or indirectly, in any manner or capacity
as advisor, principal, agent, partner, officer, director, employee, member of
any association or otherwise, in any business or activity which is at the time
competitive with any business or activity conducted by the Company and (b) be
available, unless the Participant shall have died, at reasonable times for
consultations (which shall not require substantial time or effort) at the
request of the Company's management with respect to phases of the business with
which the Participant was actively connected during the Participant's
employment, but such consultations shall not (except in the case of a
Participant whose active service was outside of the United States) be required
to be performed at any place or places outside of the United States of America
or during usual vacation periods or periods of illness or other incapacity. In
the event that either of the above conditions is not fulfilled, the Participant
shall forfeit all rights to any unexercised Option or SAR, Performance Award,
shares of Restricted Stock or Restricted Stock Equivalents held as on the date
of the breach of condition. Any determination by the Board of Directors of the
Corporation, which shall act upon the recommendation of the Chairman, that the
Participant is, or has, engaged in a competitive business or activity as
aforesaid or has not been available for consultations as aforesaid shall be
conclusive.
6.5 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board of Directors may suspend or terminate the Plan or any portion thereof
at any time and may amend it from time to time in such respects as the Board of
Directors may deem advisable in order that any Awards thereunder shall conform
to or otherwise reflect any change in applicable laws or regulations, or to
permit the Company or its employees to enjoy the benefits of any change in
applicable laws or regulations, or in any other respect the Board of Directors
may deem to be in the best interests of the Company; provided, however, that no
such amendment shall, without stock-holder approval to the extent required by
law, agreement, or the rules of any exchange upon which the Common Stock is
listed, (i) except as provided in Section 6.2, materially increase the number of
shares of Common Stock which may be issued under the Plan, (ii) materially
modify the requirements as to eligibility for participation in the Plan, (iii)
materially increase the benefits accruing to Participants under the Plan, or
(iv) extend the termination date of the Plan. No such amendment, suspension or
termination shall (A) impair the rights of Participants under outstanding
Options, SARs, Performance Awards, awards of Restricted Stock or Restricted
Stock Equivalents, Performance Accounts or Deferred Amounts without the consent
of the Participants affected thereby or (B) make any change that would
disqualify the Plan, or any other plan of the Corporation intended to be so
qualified, from the exemption provided by Rule 16b-3.
6.6 FOREIGN ALTERNATIVES
Notwithstanding the other provisions of the Plan, in the case of any Award
(including any Deferred Amount) to any Participant who is an employee of a
foreign Subsidiary or foreign branch of the Company or held by a Participant who
is in any other category specified by the Committee, the Committee may specify
that such Award shall not be represented by shares of Common Stock or
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other securities but shall be represented by rights approximately equivalent (as
determined by the Committee) to the rights that such Participant would have
received if shares of Common Stock or other securities had been issued in the
name of such Participant other-wise in accordance with the Plan (such rights
being hereinafter called "Stock Equivalents"). The Stock Equivalents
representing any such Award may subsequently, at the option of the Committee, be
converted into cash or an equivalent number of shares of Common Stock or other
securities under such circumstances and in such manner as the Committee may
determine.
6.7 DEFINITIONS AND OTHER GENERAL PROVISIONS
(a) The terms "retirement" and "disability" as used under the Plan shall be
construed by reference to the provisions of the pension plan or other similar
plan or program of the Company applicable to a Participant.
(b) The term "Fair Market Value" as it relates to Common Stock on any given date
means (i) the mean of the high and low sales prices of the Corporation's Common
Stock as reported by the Composite Tape of the New York Stock Exchange (or, if
not so reported, on any domestic stock exchanges on which the Common Stock is
then listed); or (ii) if the Common Stock is not listed on any domestic stock
exchange, the mean of the high and low sales prices of the Corporation's Common
Stock as reported by the Nasdaq Stock Market on such date or the last previous
date reported (or, if not so reported, by the system then regarded as the most
reliable source of such quotations) or, if there are no reported sales on such
date, the mean of the closing bid and asked prices as so reported; or (iii) if
the Common Stock is listed on a domestic exchange or quoted in the domestic
over-the-counter market, but there are not reported sales or quotations, as the
case may be, on the given date, the value determined pursuant to (i) or (ii)
above using the reported sale prices or quotations on the last previous date on
which so reported; or (iv) if none of the foregoing clauses apply, the fair
value as determined in good faith by the Corporation's Board of Directors or the
Committee.
(c) The term "Subsidiary" shall mean, unless the context otherwise requires, any
corporation (other than the Corporation) in an unbroken chain of corporations
beginning with the Corporation if each of the corporations other than the last
corporation in such chain owns stock possessing at least 20% of the voting power
in one of the other corporations in such chain.
(d) The adoption of the Plan shall not preclude the adoption by appropriate
means of any other stock option or other incentive plan for employees.
6.8 NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan, including without limitation, (a)
the determination of the Participants to receive Awards, (b) the form, amount
and timing of such Awards, (c) the terms and provisions of such Awards and (d)
the agreements, if any, evidencing the same, need not be
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uniform and may be made by it selectively among Participants who receive, or who
are eligible to receive, Awards under the Plan, whether or not such Participants
are similarly situated.
6.9 SUSPENSIONS, LEAVES OF ABSENCE, AND TRANSFERS
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any
suspension of employment or leave of absence from the Company granted to a
Participant. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (a) whether or not any such suspension or leave
of absence shall be treated as if the Participant ceased to be an employee and
(b) the impact, if any, of any such suspension or leave of absence on Awards
under the Plan. In the event a Participant transfers within the Company, such
Participant shall not be deemed to have ceased to be an employee for purposes of
the Plan.
6.10 LISTING, REGISTRATION, AND LEGAL COMPLIANCE
Each Award (including Deferred Amounts) shall be subject to the requirement that
if at any time the Committee shall determine, in its discretion, that the
listing, registration, or qualification of such Award, or any shares of Common
Stock or other property subject thereto, upon any securities exchange or under
any foreign, federal, or state securities or other law or regulation, or the
consent or approval of any governmental body or the taking of any other action
to comply with or otherwise with respect to any such law or regulation, is
necessary or desirable as a condition to or in connection with the granting of
such Award or the issue, delivery or purchase of shares of Common Stock or other
property thereunder, no such Award may be exercised or paid in Common Stock or
other property unless such listing, registration, qualification, consent,
approval, or other action shall have been effected or obtained free of any
conditions not acceptable to the Committee and the holder of the Award will
supply the Corporation with such certificates, representations and information
as the Corporation shall request and shall otherwise cooperate with the
Corporation in effecting or obtaining such listing, registration, qualification,
consent, approval or other action. In the case of Officers and other persons
subject to Section 16(b) of the Exchange Act, the Committee may at any time
impose any limitations upon the exercise, delivery, or payment of any Award
(including Deferred Amounts) which, in the discretion of the Committee, are
necessary or desirable in order to comply with Section 16(b) and the rules and
regulations thereunder. If the Corporation, as part of an offering of securities
or otherwise, finds it desirable because of foreign, federal, or state legal or
regulatory requirements to reduce the period during which Options or SARs may be
exercised, the Committee may, in its discretion and without the holders'
consent, so reduce such period on not less than 15 days' written notice to the
holders thereof.
6.11 LOANS
The Committee may provide for the Corporation or any Subsidiary to make loans to
finance the exercise of any Option as well as the estimated or actual amount of
any taxes payable by the holder
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as a result of the exercise or payment of any Option and may prescribe, or may
empower the Corporation or such Subsidiary to prescribe, the other terms and
conditions (including but not limited to the interest rate, maturity date and
whether the loan will be secured or unsecured) of any such loan; provided,
however, that notwithstanding the foregoing, all loans made pursuant to this
provision shall include an interest rate on the outstanding balance of the loan
at a rate of at least the then prevailing rate the Corporation would be charged
by an unaffiliated lender for a loan of a similar nature and maturity.
6.12 INDEMNIFICATION
Each person who is or shall have been a member of the Committee shall be
indemnified and held harmless by the Corporation against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
that person in connection with or resulting from any claim, action, suit, or
proceeding to which that person may be a party or in which that person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by that person in settlement thereof,
with the Corporation's approval, or paid by that person in satisfaction of any
judgment in any such action, suit, or proceeding against that person, provided
that person shall give the Corporation an opportunity, at its own expense, to
handle and defend the same before that person undertakes to handle and defend it
on that person's own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
6.13 BENEFICIARY DESIGNATION
Each Participant under the Plan may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of the Participant's death before
the Participant receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the Committee during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
6.14 RIGHTS OF PARTICIPANTS
Nothing in the Plan shall interfere with or limit in any way the right of the
Company to terminate any Participant's employment at any time, nor confer upon
any Participant any right to continue in the employ of the Company for any
period of time or to continue the Participant's present or any other rate of
compensation. No employee shall have a right to be selected as a Participant,
or, having been so selected, to be selected again as a Participant.
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6.15 COMPLIANCE WITH PROVISIONS OF TAX AND SECURITIES LAW
It is the intent of the Corporation that the Plan comply in all respects with
Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, that any
ambiguities or inconsistencies in construction of the Plan be interpreted to
give effect to such intention and that if any provision of the Plan is found not
to be in compliance with Rule 16b-3 or Section 162(m), such provision shall be
deemed null and void to the extent required to permit the Plan to comply with
Rule 16b-3 or Section 162(m), as the case may be.
6.16 REQUIREMENTS OF LAW, GOVERNING LAW
The granting of Awards and the issuance of shares of Common Stock shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
The Plan, and all related award documents, shall be construed in accordance with
and governed by the laws of the State of Delaware. . The provisions of the Plan
shall be interpreted so as to comply with the conditions or requirements of Rule
16b-3 under the Exchange Act, unless a contrary interpretation of any such
provisions is otherwise required by applicable law.
6.17 EFFECTIVE DATE
The Plan shall, subject to the approval of the holders of a majority of the
shares of Common Stock present at the 1996 annual meeting of the Corporation's
stockholders, be deemed effective as of January 1, 1996. No awards of Options,
SARs, Performance Units, Performance Shares or shares of Restricted Stock or
Restricted Stock Equivalents shall be made hereunder after December 31, 2005.
(Rev. 02/16/99)
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Exhibit 10(iii)S
WHIRLPOOL CORPORATION
1998 OMNIBUS STOCK AND INCENTIVE PLAN
(As amended February 16, 1999)
ARTICLE 1
GENERAL
1.1 PURPOSE
Whirlpool Corporation, a Delaware corporation (the "Corporation"), hereby
adopts, subject to stockholder approval, this plan which shall be known as the
WHIRLPOOL CORPORATION 1998 OMNIBUS STOCK AND INCENTIVE PLAN (the "Plan"). The
Corporation and its Subsidiaries are severally and collectively referred to
hereinafter as the "Company." The purpose of the Plan is to foster and promote
the long-term financial success of the Company and materially increase
stockholder value by: (a) strengthening the Company's capability to develop,
maintain, and direct an outstanding management team; (b) motivating superior
performance by means of long-term performance related incentives; (c)
encouraging and providing for obtaining an ownership interest in the Company;
(d) attracting and retaining outstanding executive talent by providing incentive
compensation opportunities competitive with other major companies; and (e)
enabling executives to participate in the long-term growth and financial success
of the Company.
1.2 ADMINISTRATION
(a) The Plan shall be administered by the Human Resources Committee of the Board
of Directors of the Corporation or such other committee of directors as is
designated by the Board of Directors of the Corporation (the "Committee"), which
shall consist of two or more members. Each member shall be a "Non-employee
Director " as that term is defined by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") or any similar rule which
may subsequently be in effect ("Rule 16b-3") and shall be an "outside director"
within the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of
1986, as it may be amended from time to time (the "Code"). The members shall be
appointed by the Board of Directors, and any vacancy on the Committee shall be
filled by the Board of Directors.
(b) Subject to the limitations of the Plan, the Committee shall have the sole
and complete authority to: (i) select from the regular full-time employees of
the Company those who shall participate in the Plan (a "Participant" or
"Participants"); (ii) make awards in such forms and amounts as it shall
determine; (iii) impose such limitations, restrictions and conditions upon such
awards as it shall deem appropriate; (iv) interpret the Plan and adopt, amend
and rescind administrative guidelines and other rules and regulations relating
to the Plan; (v) correct any defect or omission or reconcile any inconsistency
in this Plan or in any award granted hereunder; and (vi) make all other
determinations and take all other actions deemed necessary or advisable for the
implementation and administration of the Plan. The Committee's determinations on
matters within its authority shall be conclusive and binding upon the Company
and all other persons.
(c) All expenses associated with the Plan shall be borne by the Corporation
subject to such allocation to its Subsidiaries and operating units as it deems
appropriate.
(d) The Committee may delegate any of its authority hereunder to such persons as
it deems appropriate.
<PAGE>
1.3 SELECTION FOR PARTICIPATION
Participants shall be selected by the Committee from the employees who occupy
responsible managerial or professional positions and who have the capacity to
contribute to the success of the Company. In making this selection and in
determining the form and amount of awards, the Committee may give consideration
to the functions and responsibilities of the employee; the employee's past,
present and potential contributions to the Company's profitability and sound
growth; the value of the employee's services to the Company; and other factors
deemed relevant by the Committee. Grants may be made to the same individual on
more than one occasion.
1.4 TYPES OF AWARDS UNDER PLAN
Awards under the Plan may be in the form of any one or more of the following:
(a) Statutory Stock Options ("ISOs", which term shall be deemed to include
Incentive Stock Options as defined in Section 2.5 and any future type of tax-
qualified option which may subsequently be authorized), Non-statutory Stock
Options ("NSOs" and, collectively with ISOs, "Options") and Stock Appreciation
Rights ("SARs") as described in Article II; (b) Performance Units and
Performance Shares ("Performance Units" and "Performance Shares") as described
in Article III; and (c) Restricted Stock and Restricted Stock Equivalents
("Restricted Stock" and "Restricted Stock Equivalents") as described in Article
IV (collectively, "Awards").
1.5 SHARES SUBJECT TO THE PLAN
Shares of stock covered by Awards under the Plan may be in whole or in part
authorized and unissued or treasury shares of the Corporation's common stock,
$1.00 par value per share, or such other shares as may be substituted pursuant
to Section 6.2 ("Common Stock"). The maximum number of shares of Common Stock
which may be issued for all purposes under the Plan shall be 4 million shares
(subject to adjustment pursuant to Section 6.2). The maximum number of shares of
Common Stock which may be issued pursuant to the exercise of Options awarded
under the Plan shall be 3,750,000 shares (subject to adjustment pursuant to
Section 6.2). Any shares of Common Stock subject to an Option which for any
reason is canceled (excluding shares subject to an Option canceled upon the
exercise of a related SAR to the extent shares are issued upon exercise of such
SAR) or terminated without having been exercised, or any shares of Restricted
Stock or Performance Shares which are forfeited, shall again be available for
Awards under the Plan. The maximum number of shares of Common Stock which may be
issued pursuant to Restricted Stock and Restricted Stock Equivalent awards shall
be 1,000,000 shares, and the maximum number of shares of Common Stock which may
be issued pursuant to Performance Share and Performance Unit awards shall be
1,000,000 (subject to adjustment pursuant to Section 6.2) or the cash equivalent
thereof. No fractional shares shall be issued, and the Committee shall determine
the manner in which fractional share value shall be treated.
1.6 MAXIMUM AWARDS PER PARTICIPANT
(a) The aggregate number of shares of Common Stock that a Participant may
receive upon exercise of all of the Options and SARs awarded to such Participant
under the Plan (including those already exercised by the Participant) shall not
exceed 600,000 shares or the cash equivalent thereof.
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(b) The aggregate number of (i) all Performance Units and Performance Shares and
(ii) all shares of Restricted Stock and Restricted Stock Equivalents awarded to
a Participant in any calendar year shall not exceed the equivalent of 300,000
shares or the cash equivalent thereof.
ARTICLE II
STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS
2.1 AWARD OF STOCK OPTIONS
The Committee may, from time to time, subject to the provisions of the Plan and
such other terms and conditions as the Committee may prescribe, award to any
Participant ISOs and NSOs to purchase Common Stock.
2.2 STOCK OPTION AGREEMENTS
At the discretion of the Committee, an Option awarded under the Plan may be
evidenced by a signed written agreement containing such terms and conditions as
the Committee may from time to time determine.
2.3 OPTION PRICE
The purchase price of Common Stock under each Option (the "Option Price") shall
be the Fair Market Value of the Common Stock on the date the Option is awarded.
2.4 EXERCISE AND TERM OF OPTIONS
(a) Options awarded under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall approve,
either at the time of grant of such Options or pursuant to a general
determination, and which need not be the same for all Participants, provided
that no such Option shall be exercisable within the first twelve months of its
term. Each Option that is intended to qualify as an ISO pursuant to Section 422
of the Code, and each Option that is intended to qualify as another type of ISO
that may subsequently be authorized by law, shall comply with the applicable
provisions of the Code pertaining to such Options.
(b) The Committee shall establish procedures governing the exercise of Options
and shall require that written notice of exercise be given and that the Option
Price be paid in full in cash (including check, bank draft or money order) at
the time of exercise; provided, however, that such Option Price may be paid
within six business days of the time of exercise, if the Participant instructs
the Corporation to sell shares delivered on exercise as the Participant's agent
pursuant to a "cashless exercise" program or other similar program established
by the Committee. The Committee may permit a Participant, in lieu of part or all
of the cash payment, to make payment in Common Stock already owned by that
Participant, valued at Fair Market Value on the date of exercise, as partial or
full payment of the Option Price; provided, however, that the Committee may, in
any instance, in order to prevent any possible violation of law, require the
Option Price to be paid in cash. As soon as practicable after receipt of each
notice and full payment, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Common Stock.
The exercise of an Option shall cancel any related SAR to the extent of the
number of shares as to which the Option is exercised.
<PAGE>
2.5 LIMITATIONS ON ISOs
Notwithstanding anything in the Plan to the contrary, to the extent required
from time to time by the Code, the following additional provisions shall apply
to the grant of Options which are intended to qualify as ISOs (as such term is
defined in Section 422 of the Code):
(a) The aggregate Fair Market Value (determined as of the date the Option is
granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by any Participant during any calendar year
(under all plans of the Company) shall not exceed $100,000 or such other amount
as may subsequently be specified by the Code; provided that, to the extent that
such limitation is exceeded, any excess Options (as determined under the Code)
shall be deemed to be NSOs.
(b) Any ISO authorized under the Plan shall contain such other provisions as the
Committee shall deem advisable, but shall in all events be consistent with and
contain or be deemed to contain all provisions required in order to qualify the
Options as ISOs.
(c) All ISOs must be granted within ten years from the earlier of the date on
which this Plan was adopted by the Board of Directors or the date this Plan was
approved by the stockholders.
(d) Unless sooner exercised, terminated or canceled, all ISOs shall expire no
later than ten years after the date of grant.
2.6 TERMINATION OF EMPLOYMENT
In the event the Participant ceases to be an employee with the consent of
the Committee or upon the Participant's death, retirement or disability, each of
the Participant's outstanding Options shall be exercisable by the Participant
(or the Participant's legal representative or designated beneficiary), to the
extent that such Option was then exercisable, at any time prior to an expiration
date established by the Committee at the time of award (which may be the
original expiration date of such Option or such earlier time as the Committee
may establish), but in no event after its respective expiration date; provided
that NSOs may be exercised up to one year after the death of a Participant even
if this is beyond their expiration date. If the Participant ceases to be an
employee for any other reason, all of the Participant's then outstanding Options
shall terminate immediately.
2.7 AWARD OF STOCK APPRECIATION RIGHTS
(a) General. An SAR is a right to receive, without payment (except for
applicable withholding taxes) to the Company, a number of shares of Common
Stock, cash or a combination thereof, the amount of which is determined pursuant
to the formula set forth in Section 2.7(e). An SAR may be granted (i) with
respect to any Option granted under this Plan, either concurrently with the
grant of such Option, or at such later time as determined by the Committee (as
to all or any portion of the shares of Common Stock subject to the Option); (ii)
with respect to any stock option currently outstanding under other incentive
plans of the Corporation (as to all or any portion of the shares subject to the
stock option), on terms established by the Committee; or (iii) alone, without
reference to any related stock option. Each SAR granted by the Committee under
this Plan shall be subject to the terms and conditions of this Section.
<PAGE>
(b) Number. Each SAR granted to any Participant shall relate to such number of
shares of Common Stock as shall be determined by the Committee, subject to
adjustment as provided in Section 6.2. In the case of an SAR granted with
respect to a stock option, the number of shares of Common Stock to which the SAR
pertains shall be reduced in the same proportion that the holder of the option
exercises the related stock option.
(c) Duration. The term of each SAR shall be determined by the Committee but in
no event shall an SAR be exercisable during the first year of its term. Subject
to the foregoing, unless otherwise provided by the Committee, each SAR shall
become exercisable at such time or times, to such extent and upon such
conditions as the stock option, if any, to which it relates is exercisable.
(d) Exercise. An SAR may be exercised, in whole or in part, by giving written
notice to the Company, specifying the number of SARs which the holder wishes to
exercise. Upon receipt of such written notice, the Company shall, within 90 days
thereafter, deliver to the exercising holder a certificate for the shares of
Common Stock or cash or both, as determined by the Committee, to which the
holder is entitled.
(e) Payment. Subject to the right of the Committee to deliver cash in lieu of
shares of Common Stock, the number of shares of Common Stock which shall be
issuable upon the exercise of an SAR shall be determined by dividing:
(i) the number of shares of Common Stock as to which the SAR is exercised
multiplied by the amount of the appreciation in such shares (for this
purpose, the "appreciation" shall be the amount by which the Fair Market
Value of a share of Common Stock subject to the SAR on the exercise date
exceeds (A) in the case of an SAR related to a stock option, the purchase
price of a share of Common Stock under the stock option or (B) in the case
of an SAR granted alone, without reference to a related stock option, an
amount which shall be determined by the Committee at the time of grant,
provided, however, such amount is at least equal to the Fair Market Value
of the Common Stock on the date the SAR is awarded, (subject to adjustment
under Section 6.2)); by
(ii) the Fair Market Value of a share of Common Stock on the exercise date.
In lieu of issuing shares of Common Stock upon the exercise of an SAR, the
Committee may elect to pay the holder of the SAR cash equal to the Fair Market
Value on the exercise date of any or all of the shares which would otherwise be
issuable. No fractional shares of Common Stock shall be issued upon the exercise
of an SAR; instead, the holder of the SAR shall be entitled to receive a cash
adjustment equal to the same fraction of the Fair Market Value of a share of
Common Stock on the exercise date or to purchase the portion necessary to make a
whole share at its Fair Market Value on the date of exercise.
(f) Agreement. Each SAR awarded by the Committee shall be subject to the
provisions of the Plan and such other terms and conditions as the Committee may
prescribe. At the discretion of the Committee, SARs awarded under the Plan may
be evidenced by a signed written agreement containing such terms and conditions
as the Committee may from time to time determine.
<PAGE>
ARTICLE III
PERFORMANCE SHARES AND UNITS
3.1 AWARD OF PERFORMANCE UNITS AND PERFORMANCE SHARES
The Committee may award to any Participant Performance Shares and Performance
Units ("Performance Awards"). Each Performance Share shall represent one share
of Common Stock. Each Performance Unit shall represent the right of a
Participant to receive an amount equal to the value determined in the manner
established by the Committee at the time of award, which value may, without
limitation, be equal to the Fair Market Value of one share of Common Stock.
3.2 PERFORMANCE UNIT AND PERFORMANCE SHARE AGREEMENTS
Each Performance Award shall be subject to the provisions of the Plan and such
other terms and conditions as the Committee may prescribe. At the discretion of
the Committee, a Performance Award may be evidenced by a signed written
agreement containing such terms and conditions as the Committee may from time to
time determine.
3.3 ESTABLISHMENT OF PERFORMANCE ACCOUNTS
At the time of award, the Company shall establish an account (a "Performance
Account") for each Participant. Performance Units and Performance Shares awarded
to a Participant shall be credited to the Participant's Performance Account.
3.4 PERFORMANCE PERIOD AND TARGETS
(a) The performance period for each award of Performance Shares and Performance
Units shall be of such duration as the Committee shall establish at the time of
award; provided, however, that in no event will the performance period be less
than one year (the "Performance Period"). There may be more than one award in
existence at any one time and Performance Periods may differ.
(b) The Committee shall set performance targets relating to Performance Units
and Performance Shares which shall be based on one or more of the following
performance measures: stock price, market share, increase in sales, earnings per
share, return on equity, cost reductions, economic value added, or any other
performance measure the Committee deems appropriate. With respect to any awards
the Committee intends to qualify for the performance based exception under Code
Section 162(m), performance targets shall be established in writing by the
Committee no later than the earlier of (i) 90 days after the commencement of the
Performance Period with respect to which the award of Performance Units or
Performance Shares is made and (ii) the date as of which twenty-five percent
(25%) of such Performance Period has elapsed. At the time of setting performance
targets, the Committee shall establish superior and satisfactory performance
targets to be achieved within the Performance Period. Failure to meet the
satisfactory performance target will earn no Performance Award. Performance
Awards will be earned as determined by the Committee in respect of a Performance
Period in relation to the degree of attainment of performance between the
superior and satisfactory performance targets.
<PAGE>
3.5 PAYMENT RESPECTING PERFORMANCE AWARDS
(a) Performance Awards shall be earned to the extent that their terms and
conditions are met. Notwithstanding the foregoing, Performance Awards and any
other amounts credited to the Participant's Performance Account shall be payable
to the Participant in accordance with the relevant award documents or otherwise
when, if, and to the extent that the Committee determines to make such payment.
All payment determinations shall be made by the Committee during the first four
months following the end of the Performance Period.
(b) The Participant may elect to defer any payment respecting a Performance
Award pursuant to Article V hereof.
(c) Payment for Performance Awards may be made in a lump sum or in installments,
in cash, Common Stock or in a combination thereof as the Committee may
determine.
3.6 TERMINATION OF EMPLOYMENT
If the Participant ceases to be an employee before the end of any Performance
Period with the consent of the Committee or upon the Participant's death,
retirement or disability before the end of any Performance Period, the
Committee, taking into consideration the performance of such Participant and the
performance of the Company over the Performance Period, may authorize the
payment to such Participant (or the Participant's legal representative or
designated beneficiary) of all or a portion of the amount which would have been
paid to the Participant had the Participant continued as an employee to the end
of the Performance Period. If a Participant ceases to be an employee for any
other reason, any unpaid amounts for outstanding Performance Periods shall be
forfeited.
ARTICLE IV
RESTRICTED STOCK AND RESTRICTED STOCK EQUIVALENTS
4.1 AWARD OF RESTRICTED STOCK
The Committee may award to any Participant shares of Common Stock, subject to
this Article IV and such other terms and conditions as the Committee may
prescribe (such shares being herein called "Restricted Stock"). Each certificate
for Restricted Stock shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Company.
4.2 RESTRICTED STOCK AGREEMENT
At the discretion of the Committee, Restricted Stock awarded under the Plan may
be evidenced by a signed written agreement containing such terms and conditions
as the Committee may from time to time determine.
4.3 RESTRICTION PERIOD
<PAGE>
At the time of award there shall be established for each Participant, a
restriction period (the "Restriction Period") which shall lapse (a) upon the
completion of a period of time ("Time Goal") as shall be determined by the
Committee, or (b) upon the achievement of performance goals within certain time
limitations ("Performance/Time Goal") as shall be determined by the Committee;
provided that such Time Goal shall last at least until the third year
anniversary of the date of the award or the Performance/Time Goal shall last at
least until the first year anniversary of the date of the award. Shares of
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered, except as hereinafter provided, during the Restriction Period.
Except for such restrictions on transfer, the Participant as owner of such
shares of Restricted Stock shall have all the rights of a holder of Common
Stock. With respect to shares of Restricted Stock which are issued subject to a
Time Goal, the Company shall redeliver to the Participant (or the Participant's
legal representative or designated beneficiary) the certificates deposited
pursuant to Section 4.1 at the expiration of the Restriction Period. With
respect to shares of Restricted Stock which are issued subject to a Performance
/Time Goal, the Company shall redeliver to the Participant (or the Participant's
legal representative or designated beneficiary) the certificates deposited
pursuant to Section 4.1 upon the achievement of the performance goal on or
before the close of the Restriction Period. With respect to shares of Restricted
Stock which are issued subject to a Performance/Time Goal which fail to meet the
goal before the end of the restriction period, all such shares shall be
forfeited, and the Company shall have the right to complete a blank stock power
in order to return such shares to the Company.
4.4 TERMINATION OF EMPLOYMENT
(a) In the event the Participant ceases to be an employee with the consent of
the Committee or upon the Participant's death, retirement or disability before
the end of the Restriction Period and the Participant has received an award
subject to a Time Goal, the restrictions imposed under this Article IV shall
lapse with respect to such number of those shares subject to a Time Goal as
shall be determined by the Committee, but, in no event less than a number equal
to the product of (a) a fraction, the numerator of which is the number of
completed months elapsed after the date of award of the Restricted Stock subject
to a Time Goal to the Participant to the date of termination and the denominator
of which is the number of months in the Restriction Period, multiplied by (b)
the number of shares of Restricted Stock subject to a Time Goal; provided,
however, that notwithstanding the foregoing, no restrictions shall lapse if the
Participant ceases to be an employee prior to the three year anniversary of the
date upon which the award was granted.
(b) In the event the Participant ceases to be an employee with the consent of
the Committee or upon the Participant's death, retirement or disability before
the end of the Restriction Period and the Participant has received an award
subject to a Performance/Time Goal, the restrictions imposed under this Article
IV shall lapse upon the achievement of the Performance/Time Goal within two
years of the Participant's termination of employment with respect to such number
of those shares subject to a Performance/Time Goal as shall be determined by
the Committee, but, in no event, less than a number equal to the product of (a)
a fraction, the numerator of which is the number of completed months elapsed
after the date of award of the Restricted Stock subject to a Performance/Time
Goal to the Participant to the date of termination of the Participant and the
denominator of which is the number of months elapsed after the date award of the
Restricted Stock subject to a Performance/Time Goal to the Participant to the
date of achievement of the Performance/Time Goal, multiplied by (b) the number
of shares of Restricted Stock subject to a Performance/Time Goal; provided,
however, that notwithstanding the foregoing, no restrictions
<PAGE>
shall lapse if the Participant ceases to be an employee prior to the first year
anniversary of the date upon which the award was granted.
(c) In the event the Participant ceases to be an employee for any other reason,
all shares of Restricted Stock theretofore awarded to that Participant which are
still subject to restrictions shall be forfeited and the Company shall have the
right to complete the blank stock power.
4.5 AWARD OF RESTRICTED STOCK EQUIVALENTS
In lieu of or in addition to the foregoing Restricted Stock Awards, the
Committee may award to any Participant restricted stock equivalents, subject to
the terms and conditions of Paragraphs 4.2, 4.3, and 4.4 of this Article IV
being applied to such awards as if those awards were for Restricted Stock and
subject to such other terms and conditions as the Committee may prescribe
("Restricted Stock Equivalents"). Each Restricted Stock Equivalent shall
represent the right of the Participant to receive an amount determined in the
manner established by the Committee at the time of award, which value may,
without limitation, be equal to the Fair Market Value of one share of Common
Stock. Payment for Restricted Stock Equivalents may be made in a lump sum or
installments, in cash, Common Stock or in a combination thereof as the Committee
may determine.
ARTICLE V
DEFERRAL OF PAYMENTS
5.1 ELECTION TO DEFER
A Participant may elect, with the consent of the Committee, no later than
December 31 of the last full calendar year of the Performance Period, to defer
all or a portion of the Participant's Performance Award within deferral limits
established by the Committee, and the Committee may permit or require the
deferral of any other Award payment, subject to such rules and procedures as it
may establish (the "Deferred Amount"). The Committee may permit amounts now or
hereafter deferred or available for deferral under any present or future
incentive compensation program or deferral arrangement of the Company to be
deemed Deferred Amounts and to become subject to the provisions of this Article.
All Deferred Amounts will be subject to such terms and conditions and shall
accrue such yield thereon (which may be measured by the Fair Market Value of the
Common Stock and dividends thereon) as the Committee may from time to time
establish.
5.2 DEFERRAL PERIOD
The Participant may, with the consent of the Committee, elect to receive payment
of Deferred Amounts and any yield thereon either before or after retirement in a
lump sum or in installments. Upon the death of a Participant, payments of any
amounts hereunder shall be made to the Participant's designated beneficiary
(pursuant to Section 6.13) or estate (in the absence of a designated
beneficiary) in the manner elected by the Participant or (in the event the
Participant made no election) in the manner determined by the Committee. The
period between the date the Participant's Deferred Amount becomes payable and
the final payment of such Deferred Amount hereunder shall be known as the
"Deferral Period."
5.3 PARTICIPANT REPORTS
<PAGE>
Annually, each Participant who has a Deferred Amount will receive a report
setting forth all then Deferred Amounts and the yield thereon to date.
5.4 PAYMENT OF DEFERRED AMOUNTS
Unless otherwise agreed by the Company and the Participant, payment of Deferred
Amounts may be in cash, Common Stock or partly in cash and partly in Common
Stock, as the Committee shall determine.
5.5 ESTABLISHMENT OF TRUST
The Committee, in its sole discretion, may establish a trust to hold Deferred
Amounts or any portion thereof for the benefit of Participants.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 NON-TRANSFERABILITY
Except as provided below, no Award under the Plan (including any Deferred
Amount), and no interest therein, shall be transferable by the Participant
otherwise than by will or, if the Participant dies intestate, by the laws of
descent and distribution. All Awards shall be exercisable or received during the
Participant's lifetime only by the Participant or his legal representative.
Notwithstanding the foregoing, the Committee may from time to time permit Awards
to be transferable subject to such terms and conditions as the Committee may
impose. Any transfer contrary to this Section 6.1 will nullify the Award.
6.2 ADJUSTMENTS UPON CERTAIN CHANGES:
In the event of a stock dividend or stock split, or combination or other
increase or reduction in the number of issued shares of Common Stock, the Board
of Directors or the Committee may, in order to prevent the dilution or
enlargement of rights under Awards (including any Deferred Amounts), make such
adjustments in the number and type of shares authorized by this Plan, the number
and type of shares covered by, or with respect to which payments are measured
under, outstanding Awards and the exercise prices specified therein as may be
determined to be appropriate and equitable. The Committee may, notwithstanding
any other provision of the Plan to the contrary, provide in the documents
evidencing any Award (including Deferred Amounts) or, prior to any change in
control as defined in the Whirlpool Corporation Salaried Employees Retirement
Plan ("Change in Control"), provide through unilateral action of the Committee
for adjustments to such Award in order to prevent the dilution or enlargement of
rights thereunder, to provide for substitute consideration thereunder or to
provide for acceleration of benefits thereunder in the event of a Change in
Control, merger, consolidation, reorganization, recapitalization, sale or
exchange of substantially all assets or dissolution of or spin-off or similar
transaction by the Company; provided, however, that no such provision shall
require such acceleration of benefits in connection with a Change in Control as
to any Award (including Deferred Amounts) held by either (a) a Participant who
is an elected officer of the Company immediately prior to the transaction or
series of transactions in which the Change in Control (the "Transaction") is to
occur or (b) any other Participant who is designated by the Committee at the
time the Award is made or subsequently
<PAGE>
thereto and, in either such case, who will hold an "Excess Equity Interest" in
the Company, its successor or any of its affiliates after such Change in
Control, unless a majority of the disinterested members of the Board of
Directors approves such acceleration prior to the Change in Control. An "Excess
Equity Interest" means that (i) the percentage interest in the Common Stock and
similar securities of the Company, its successor, or any of its affiliates to be
beneficially owned by the Participant after the Change in Control ("Post-Change
Securities") will exceed the sum of (A) one-half of one percent (0.5%) and (B)
the percentage interest in the Common Stock of the Company beneficially owned by
the Participant immediately prior to the Transaction, such percentages to be
determined on a fully-diluted basis, or (ii) the Participant will receive in
connection with the Change in Control (in exchange for his Common Stock, as
compensation and otherwise) a greater amount of Post-Change Securities, per
share of Common Stock of the Company beneficially owned by him (including shares
which may be acquired under stock options) immediately prior to the Transaction
than stockholders of the Company who are not employed by the Company will have
the right to receive, per share of Common Stock held by such stockholders.
6.3 TAX WITHHOLDING
(a) The Company shall have the power to withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy any withholding or other
tax due from the Corporation with respect to any amount payable and/or shares
issuable under the Plan, and the Corporation may defer such payment or issuance
unless indemnified to its satisfaction.
(b) Subject to the consent of the Committee, due to (i) the exercise of a NSO,
(ii) lapse of restrictions on a Restricted Stock Award or (iii) the issuance of
any other stock award under the Plan, a Participant may make an irrevocable
election (an "Election") to (A) have shares of Common Stock otherwise issuable
under (i) withheld , or (B) tender back to the Company shares of Common Stock
received pursuant to (i), (ii) or (iii), or (C) deliver back to the Company
pursuant to (i), (ii) or (iii) previously-acquired shares of Common Stock having
a Fair Market Value sufficient to satisfy all or part of the Participant's
estimated tax obligations associated with the transaction. Such Election must be
made by a Participant prior to the date on which the relevant tax obligation
arises (the "Tax Date"). The Committee may disapprove of any Election, may
suspend or terminate the right to make Elections, or may provide with respect to
any Award under this Plan that the right to make Elections shall not apply to
such Awards.
6.4 CONDITIONS ON AWARDS
In the event that the employment of a Participant holding any unexercised Option
or SAR, any unearned Performance Award, any unearned shares of Restricted Stock
or any unearned Restricted Stock Equivalents shall terminate with the consent of
the Committee or by reason of retirement or disability, the rights of such
Participant to any such Award shall be subject to the conditions that until any
such Option or SAR is exercised, or any such Performance Award, share of
Restricted Stock or Restricted Stock Equivalent is earned, the Participant shall
(a) not engage, either directly or indirectly, in any manner or capacity as
advisor, principal, agent, partner, officer, director, employee, member of any
association or otherwise, in any business or activity which is at the time
competitive with any business or activity conducted by the Company and (b) be
available, unless the Participant shall have died, at reasonable times for
consultations (which shall not require substantial time or effort) at the
request of the Company's management with respect to phases of the business with
which the Participant was actively connected during the Participant's
employment, but such consultations shall not (except in the case of a
Participant whose active
<PAGE>
service was outside of the United States) be required to be performed at any
place or places outside of the United States of America or during usual vacation
periods or periods of illness or other incapacity. In the event that either of
the above conditions is not fulfilled, the Participant shall forfeit all rights
to any unexercised Option or SAR, Performance Award, shares of Restricted Stock
or Restricted Stock Equivalents held as on the date of the breach of condition.
Any determination by the Board of Directors of the Corporation, which shall act
upon the recommendation of the Chairman, that the Participant is, or has,
engaged in a competitive business or activity as aforesaid or has not been
available for consultations as aforesaid shall be conclusive.
6.5 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board of Directors may suspend or terminate the Plan or any portion thereof
at any time and may amend it from time to time in such respects as the Board of
Directors may deem advisable in order that any Awards thereunder shall conform
to or otherwise reflect any change in applicable laws or regulations, or to
permit the Company or its employees to enjoy the benefits of any change in
applicable laws or regulations, or in any other respect the Board of Directors
may deem to be in the best interests of the Company; provided, however, that no
such amendment shall, without stockholder approval to the extent required by
law, agreement or the rules of any exchange upon which the Common Stock is
listed, (i) except as provided in Section 6.2, materially increase the number of
shares of Common Stock which may be issued under the Plan, (ii) materially
modify the requirements as to eligibility for participation in the Plan, (iii)
materially increase the benefits accruing to Participants under the Plan or (iv)
extend the termination date of the Plan. No such amendment, suspension or
termination shall impair the rights of Participants under outstanding Options,
SARs, Performance Awards, awards of Restricted Stock or Restricted Stock
Equivalents, Performance Accounts or Deferred Amounts without the consent of the
Participants affected thereby.
6.6 FOREIGN ALTERNATIVES
Notwithstanding the other provisions of the Plan, in the case of any Award
(including any Deferred Amount) to any Participant who is an employee of a
foreign Subsidiary or foreign branch of the Company or held by a Participant who
is in any other category specified by the Committee, the Committee may specify
that such Award shall not be represented by shares of Common Stock or other
securities but shall be represented by rights approximately equivalent (as
determined by the Committee) to the rights that such Participant would have
received if shares of Common Stock or other securities had been issued in the
name of such Participant otherwise in accordance with the Plan (such rights
being hereinafter called "Stock Equivalents"). The Stock Equivalents
representing any such Award may subsequently, at the option of the Committee, be
converted into cash or an equivalent number of shares of Common Stock or other
securities under such circumstances and in such manner as the Committee may
determine.
6.7 DEFINITIONS AND OTHER GENERAL PROVISIONS
(a) The terms "retirement" and "disability" as used under the Plan shall be
construed by reference to the provisions of the pension plan or other similar
plan or program of the Company applicable to a Participant.
(b) The term "Fair Market Value" as it relates to Common Stock on any given date
means (i) the mean of the high and low sales prices of the Common Stock as
reported by the Composite Tape
<PAGE>
of the New York Stock Exchange (or, if not so reported, on any domestic stock
exchanges on which the Common Stock is then listed); or (ii) if the Common Stock
is not listed on any domestic stock exchange, the mean of the high and low sales
prices of the Common Stock as reported by the Nasdaq Stock Market on such date
or the last previous date reported (or, if not so reported, by the system then
regarded as the most reliable source of such quotations) or, if there are no
reported sales on such date, the mean of the closing bid and asked prices as so
reported; of (iii) if the Common Stock is listed on a domestic exchange or
quoted in the domestic over-the-counter market, but there are not reported sales
or quotations, as the case may be, on the given date, the value determined
pursuant to (i) or (ii) above using the reported sale prices or quotations on
the last previous date on which so reported; or (iv) if none of the foregoing
clauses apply, the fair value as determined in good faith by the Corporation's
Board of Directors or the Committee.
(c) The term "Subsidiary" shall mean, unless the context otherwise requires, any
corporation (other than the Corporation) in an unbroken chain of corporations
beginning with the Corporation if each of the corporations other than the last
corporation in such chain owns stock possessing at least 20% of the voting power
in one of the other corporations in such chain.
(d) The adoption of the Plan shall not preclude the adoption by appropriate
means of any other stock option or other incentive plan for employees.
6.8 NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan, including without limitation, (a)
the determination of the Participants to receive Awards, (b) the form, amount
and timing of such Awards, (c) the terms and provisions of such Awards and (d)
the agreements, if any, evidencing the same, need not be uniform and may be made
by it selectively among Participants who receive, or who are eligible to
receive, Awards under the Plan, whether or not such Participants are similarly
situated.
6.9 SUSPENSIONS, LEAVES OF ABSENCE, AND TRANSFERS
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan with respect to any
suspension of employment or leave of absence from the Company granted to a
Participant. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (a) whether or not any such suspension or leave
of absence shall be treated as if the Participant ceased to be an employee and
(b) the impact, if any, of any such suspension or leave of absence on Awards
under the Plan. In the event a Participant transfers within the Company, such
Participant shall not be deemed to have ceased to be an employee for purposes of
the Plan.
6.10 LISTING, REGISTRATION, AND LEGAL COMPLIANCE
Each Award (including Deferred Amounts) shall be subject to the requirement that
if at any time the Committee shall determine, in its discretion, that the
listing, registration, or qualification of such Award, or any shares of Common
Stock or other property subject thereto, upon any securities exchange or under
any foreign, federal or state securities or other law or regulation, or the
consent or approval of any governmental body or the taking of any other action
to comply with or otherwise with respect to any such law or regulation, is
necessary or desirable as a condition to or in connection with the granting of
such Award or the issue, delivery or purchase of shares of
<PAGE>
Common Stock or other property thereunder, no such Award may be exercised or
paid in Common Stock or other property unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained free of any conditions not acceptable to the Committee. The holder of
the Award will supply the Company with such certificates, representations and
information as the Company shall request and shall otherwise cooperate with the
Company in effecting or obtaining such listing, registration, qualification,
consent, approval or other action. In the case of Officers and other persons
subject to Section 16 of the Exchange Act, the Committee may at any time impose
any limitations upon the exercise, delivery or payment of any Award (including
Deferred Amounts) which, in the discretion of the Committee, are necessary or
desirable in order to comply with Section 16 and the rules and regulations
thereunder. If the Company, as part of an offering of securities or otherwise,
finds it desirable because of foreign, federal or state legal or regulatory
requirements to reduce the period during which Options or SARs may be exercised,
the Committee may, in its discretion and without the holders' consent, so reduce
such period on not less than 15 days prior written notice to the holders
thereof.
6.11 LOANS
The Committee may provide for the Company to make loans to finance the exercise
of any Option as well as the estimated or actual amount of any taxes payable by
the holder as a result of the exercise or payment of any Option and may
prescribe, or may empower the Company to prescribe, the other terms and
conditions (including but not limited to the interest rate, maturity date and
whether the loan will be secured or unsecured) of any such loan; provided,
however, that notwithstanding the foregoing, all loans made pursuant to this
provision shall include an interest rate on the outstanding balance of the loan
at a rate of at least the then prevailing rate the Company would be charged by
an unaffiliated lender for a loan of a similar nature and maturity.
6.12 INDEMNIFICATION
Each person who is or shall have been a member of the Committee shall be
indemnified and held harmless by the Corporation against and from any loss,
cost, liability or expense that may be imposed upon or reasonably incurred by
that person in connection with or resulting from any claim, action, suit or
proceeding to which that person may be a party or in which that person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by that person in settlement thereof,
with the Company's approval, or paid by that person in satisfaction of any
judgment in any such action, suit or proceeding against that person, provided
that person shall give the Company an opportunity, at its own expense, to handle
and defend the same before that person undertakes to handle and defend it on
that person's own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Certificate of Incorporation or By-laws, as a
matter of law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
6.13 BENEFICIARY DESIGNATION
Each Participant under the Plan may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of the Participant's death before
the Participant receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the
<PAGE>
Committee during the Participant's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
6.14 RIGHTS OF PARTICIPANTS
Nothing in the Plan shall interfere with or limit in any way the right of the
Company to terminate any Participant's employment at any time, nor confer upon
any Participant any right to continue in the employ of the Company for any
period of time or to continue the Participant's present or any other rate of
compensation. No employee shall have a right to be selected as a Participant,
or, having been so selected, to be selected again as a Participant.
6.15 REQUIREMENTS OF LAW, GOVERNING LAW
The granting of Awards and the issuance of shares of Common Stock shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
The Plan, and all related award documents, shall be construed in accordance with
and governed by the laws of the State of Delaware. The provisions of the Plan
shall be interpreted so as to comply with the conditions or requirements of Rule
16b-3 under the Exchange Act, unless a contrary interpretation of any such
provisions is otherwise required by applicable law.
6.16 EFFECTIVE DATE
The Plan shall, subject to the approval of the holders of a majority of the
shares of Common Stock present at the 1998 annual meeting of the Corporation's
stockholders, be deemed effective as of January 1, 1998. No awards of Options,
SARs, Performance Units, Performance Shares or shares of Restricted Stock or
Restricted Stock Equivalents shall be made hereunder after December 31, 2007.
///
(Rev. 02/16/99)
<PAGE>
EXHIBIT 11--COMPUTATION OF EARNINGS PER SHARE
WHIRLPOOL CORPORATION AND SUBSIDIARIES
(all amounts in millions except earnings per share)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ -------
<S> <C> <C> <C>
Basic:
Average Shares Outstanding............................ 75.2 75.8 74.7
Earnings (Loss):
Continuing Operations............................... $347.1 $310.3 $ (46.4)
Discontinued Operations............................. 0.0 14.8 31.6
------ ------ -------
Net Earnings (Loss)................................... $347.1 $325.1 $ (14.8)
====== ====== =======
Earnings (Loss) Per Share from Continuing Operations.. $ 4.61 $ 4.09 $ (0.62)
Net Earnings (Loss) Per Share......................... $ 4.61 $ 4.29 $ (0.20)
====== ====== =======
Diluted:
Average Shares Outstanding............................ 75.2 75.8 74.7
Treasury Stock Method (a):
Stock Options....................................... 0.8 0.7 --
------ ------ -------
Average Shares Outstanding.............................. 76.0 76.5 74.7
====== ====== =======
Diluted Earnings (Loss) from Continuing Operations.... $347.1 $310.3 $ (46.4)
====== ====== =======
Diluted Earnings (Loss) Per Share from Continuing
Operations........................................... $ 4.56 $ 4.06 $ (0.62)
====== ====== =======
Diluted Net Earnings (Loss) Per Share................. $ 4.56 $ 4.25 $ (0.20)
====== ====== =======
</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>
December 31,
-------------
1999 1998
------ ------
<S> <C> <C>
Pretax earnings.................................................. $ 514 $ 564
Portion of rents representative of the interest factor........... 22 20
Interest on indebtedness......................................... 166 260
Amortization of debt expense and premium......................... 1 1
WFC preferred stock dividend..................................... 4 5
------ ------
Adjusted income.............................................. $ 707 $ 851
====== ======
<CAPTION>
Fixed charges
- -------------
<S> <C> <C>
Portion of rents representative of the interest factor......... $ 22 $ 20
Interest on indebtedness....................................... 166 260
Amortization of debt expense and premium....................... 1 1
WFC preferred stock dividend................................... 4 5
------ ------
$ 193 $ 287
====== ======
Ratio of earnings to fixed charges............................... 3.7 3.0
====== ======
</TABLE>
F-11
<PAGE>
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
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 company's investment in its Brazilian subsidiary, Brasmotor S.A.
(Brasmotor), is accounted for on a consolidated basis for the full year 1999 and
1998 and the last two months of 1997. Prior to the consolidation, the Brazilian
operations were accounted for on an equity basis.
EARNINGS
Core earnings increased 31% in 1999 while 1998 core earnings increased 37% over
1997. The term "core earnings" refers to earnings from continuing operations
excluding the effects of the first quarter 1999 Brazilian currency devaluation
and restructuring and special operating charges recorded in 1997.
Earnings and earnings per share for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
-----------------------------
(dollars in millions, except per share data) 1999 1998 1997
<S> <C> <C> <C>
Core earnings $ 407 $ 310 $ 226
- -------------------------------------------------------------------------------
Diluted core earnings per share $5.35 $4.06 $ 2.99
- -------------------------------------------------------------------------------
Earnings (loss) from continuing operations $ 347 $ 310 $ (46)
- -------------------------------------------------------------------------------
Diluted earnings (loss) per share from
continuing operations $4.56 $4.06 $(0.62)
- -------------------------------------------------------------------------------
Net earnings (loss) $ 347 $ 325 $ (15)
- -------------------------------------------------------------------------------
Diluted net earnings (loss) per share $4.56 $4.25 $(0.20)
- -------------------------------------------------------------------------------
</TABLE>
Earnings from continuing operations and net earnings for 1999 were reduced $60
million after-taxes and minority interests, or $0.79 per diluted share, by the
first quarter's Brazilian currency devaluation.
During 1998, the company recorded an after-tax gain from discontinued operations
of $15 million or $0.19 per diluted share related to the sale of consumer
financing and European inventory financing assets to Transamerica Distribution
Finance Corporation (TDF), concluding a series of transactions to dispose of its
financing business initiated in the fourth quarter of 1997. Over 1998 and 1997,
the company recorded total after-tax gains from discontinued operations of $57
million, or $0.74 per diluted share related to these transactions.
In 1997, an after-tax and minority interests restructuring charge of $232
million, or $3.07 per diluted share and an after-tax and minority interests
special operating charge of $40 million, or $0.54 per diluted share were
incurred to better align the company's cost structure within the global home-
appliance marketplace. Discontinued operating results for 1997 were $31
million, or $42
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
per diluted share, including an after-tax special operating charge of $22
million, or $0.29 per diluted share, an after-tax gain on business dispositions
of $42 million or $0.55 per diluted share and discontinued earnings (before
special charges) of $11 million or $0.16 per diluted share. Refer to Notes 4 and
11 to the accompanying consolidated financial statements.
Equity earnings(loss) were $(4) million, $1 million and $67 million in 1999,
1998 and 1997. The decrease from 1998 was due primarily to the consolidation of
Brasmotor starting in the last two months of 1997.
NET SALES
Net sales were $10.5 billion in 1999, a 2% increase over $10.3 billion in 1998.
Net sales were $8.6 billion in 1997. The increase in 1999 results was primarily
from a 9% increase in unit volumes, partially offset by the impact of currency
fluctuations around the world. Excluding currency fluctuations, sales would have
increased 11% over 1998. The regional trends were as follows:
- - North American overall unit volumes were up 12%, with major appliances up
13% in an industry which was up 11%. This volume increase translated into a
10% increase in net sales. Unit volumes and net sales were up 10% and 6%,
respectively, in the 1998 versus 1997 comparison.
- - European unit sales increased 7% in an industry which increased 3%, while
net sales were up 1% over a year ago reflecting the impact of currency
fluctuations. Excluding the impact of currency fluctuations, net sales
would have increased 6% over 1998. Unit volumes and net sales increased 7%
and 4%, respectively, in the 1998 versus 1997 comparison due to higher
volume and improved product mix.
- - A weak Brazilian economy in the first half of 1999 and the Brazilian
currency devaluation, which occurred primarily in the first quarter,
contributed to flat unit sales and a 20% decrease in net sales in Latin
America for the year versus 1998. Net sales adjusted for currency
fluctuations increased 16% over 1998.
The increase in 1998 consolidated net sales over 1997 was due primarily to the
full year consolidation of Brasmotor. Excluding the impact of consolidating
Brasmotor and currency fluctuations, net sales were up 4% in 1998 over 1997.
GROSS MARGIN
The gross margin percentage increased nearly one percentage point over 1998 to
25.3%, due primarily to benefits resulting from the restructuring started in
1997 and ongoing productivity improvements from the company's Operational
Excellence program. These benefits combined to more than offset a change in the
classification of certain North American sales allowances in 1999 from selling,
general and administrative expenses into net sales. The reclassification reduced
the full year gross margin by 0.3 percentage points. The regions all generated
strong improvements during 1999 as North America's gross margin as a percentage
of sales, excluding the sales
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
allowance reclassification, increased 0.9 percentage points and Europe, Brazil
and Asia improved 1.2, 1.1 and 4.3 percentage points, respectively.
The gross margin percentage improved by nearly one percentage point in 1998
versus 1997. The North American gross margin percentage improved due to
increased volume, productivity improvements and reduced material costs,
partially offset by price deterioration. The European gross margin improved due
to the benefits of restructuring plus manufacturing efficiencies and reduced
material costs.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses as a percent of net sales decreased
from 1998 due to improvements related to restructuring and a 0.3 percentage
points improvement due to the North American sales allowance reclassification.
These improvements were partially offset by $36 million in pre-tax provisions in
Brazil related to credit risk. The regional trends were as follows:
- - North American expenses as a percentage of net sales increased 0.6
percentage points, excluding the sales allowance reclassification mentioned
above, due to a temporary increase in logistics costs and expenses related
to the implementation of a new Enterprise Resource Planning system.
- - European expenses as a percent of net sales improved by one full percentage
point due to reduced costs mainly from restructuring and further efficiency
savings.
- - Brazil's expenses as a percent of net sales improved slightly due to cost
reduction efforts.
- - Asia's expenses as a percentage of net sales improved 4.5 points due to
increased sales and continued cost reductions efforts.
The improvement of over one percentage point in 1998 versus 1997 was due to
restructuring savings and other cost reduction initiatives, partially offset by
pre-tax provisions totaling $28 million in Brazil related to increased credit
risk.
Other Income and Expense
- ------------------------
Other income (expense) was $237 million unfavorable in 1999 versus 1998
primarily due to the impact from the Brazilian currency devaluation. The
Brazilian real declined from 1.21 to 1.82 per US Dollar from mid-January 1999,
when the Brazilian government changed its foreign exchange policy to a floating
exchange rate, to December 31, 1999. The main impact from the devaluation
occurred in the first quarter and resulted in a $146 million pre-tax charge to
earnings (Whirlpool's share after-tax and minority interest was $53 million).
Also included in this category was a $12 million pre-tax mark-to-market charge
($7 million after-tax) related to short term forward contracts purchased to
hedge movement in Brazil's currency. For the full year, foreign exchange losses
within the Brazilian operations totalled $169 million pre-tax (Whirlpool's share
after-tax and minority interest was $62 million) and charges related to short
term forward contracts totaled $23 million pre-tax ($14 million after-tax).
Interest expense decreased $94 million over 1998, but this improvement was
offset by lower interest income. Both of these changes were due to the
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
restructuring of the Brazilian balance sheet in order to reduce the company's
exposure to exchange rate fluctuations.
Other income (expense) for 1998 was favorable compared to 1997 primarily due to
the inclusion of the Brazilian operations in the consolidated results for the
full year 1998 versus two months in 1997.
Income Taxes
- ------------
The effective tax rate for continuing operations was 37% in 1999 (adjusted for
the effect of the Brazilian currency devaluation), the same as 1998, and 44% in
1997 (adjusted for restructuring and other special operating charges). Including
the Brazilian currency devaluation, the effective tax rate for 1999 was 38%. The
decrease from 1997 to 1998 was due to the impact of consolidating Brasmotor, the
recognition of certain tax benefits in Europe and Brazil, and the lower impact
of permanent tax differences resulting from higher earnings. Including
restructuring and other special operating charges, the effective tax benefit
rate for 1997 was 5%.
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 currency translation adjustments and changes in
operating assets and liabilities such as receivables, inventories and payables.
Cash provided by operating activities totaled $801 million versus $763 million
in 1998. Cash provided by operations was $593 million in 1997. The increase in
1998 from 1997 was primarily due to higher earnings, partially offset by
spending for restructuring.
Investing Activities
- --------------------
The principal recurring investing activities are property additions. Net
property additions for continuing operations were $437 million, $523 million and
$378 million in 1999, 1998 and 1997. The increased spending in 1998 over the
1999 and 1997 levels, was primarily due to significant expenditures in Brazil
for product renewals, more efficient production methods and equipment
replacement for normal wear and tear.
Refer to Note 3 to the accompanying consolidated financial statements for
discussion of business dispositions and acquisitions during the last three
years.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Financing Activities
- --------------------
Dividends to stockholders totaled $103 million, $102 million and $102 million in
1999, 1998 and 1997.
The company's net borrowings decreased by $324 million in 1999, excluding the
effect of currency fluctuations. All of the reduction was in shorter term notes
payable and funded through cash generated from operations and existing cash
balances in Brazil.
The company's net borrowings decreased by $423 million in 1998, excluding the
effect of currency fluctuations, resulting primarily from proceeds related to
the Whirlpool Financial Corporation (WFC) asset sales. Also during 1998, the
company redeemed $40 million of WFC preferred stock.
FINANCIAL CONDITION AND OTHER MATTERS
The financial position of the company remains strong as evidenced by the
December 31, 1999 balance sheet. The company's total assets were $6.8 billion
and stockholders' equity is $1.9 billion at the end of 1999 versus $7.9 billion
and $2.0 billion respectively at the end of 1998. The decreases from 1998 were
due primarily to the impact of the Brazilian currency devaluation and the
weakening of the euro.
The overall debt to invested capital ratio (debt ratio) of 37.7% was down from
43.5% in 1998 due primarily to lower borrowings which were reduced by cash
generated from operations and existing cash balances in Brazil. The company's
debt continues to be rated investment grade by Moody's Investors Service Inc.
(Baal), Standard and Poor's (BBB+) and Duff & Phelps (A-).
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.
On January 7, 2000, the company completed its tender offer for the outstanding
publicly traded shares in Brazil of its subsidiaries Brasmotor and Multibras
S.A. Eletrodomesticos (Multibras). In completing the offer, the company
purchased additional shares of Brasmotor and Multibras for $283 million. With
this additional investment, the company's equity interest in its Brazilian
subsidiaries increased from approximately 55% to approximately 87%.
On March 1, 1999, the company announced that its Board of Directors approved the
repurchase of up to $250 million of the company's outstanding shares of common
stock. The shares are to be purchased on the open market and through privately
negotiated sales as the company deems appropriate. Through December 31, 1999,
the company had repurchased 2,662,100 shares at a cost of $167 million.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The company recorded $58 million pre-tax of recovered Brazilian sales taxes paid
in prior years during 1999. This recovery of taxes paid under a Brazilian law,
which was successfully challenged in the courts, is substantially complete. The
company received $42 million of pre-tax benefits from a Brazilian government
export incentive (Befiex) recorded in 1998. In 1997, the company recorded $34
million in Befiex and other tax benefits. The Befiex program ended in mid-July
1998.
In December 1996, a favorable decision was obtained by Multibras and 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 reais (equivalent to US$440 million as of December 1996)
relating to the favorable decision for exports from July 1988 through December
1996. This amount is impacted by exchange rate fluctuations, offset by accrued
interest. 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 is uncertain.
Market Risk
- -----------
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 that 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 that are expected to be generated by the European business over time.
(Refer to Notes 1 and 8 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, 1999, a ten percent appreciation of
the USD versus the European currencies alone would have resulted in an
incremental unrealized gain on these contracts of $41 million. The converse
event would have resulted in an incremental unrealized loss on these contracts
of $47 million. As of December 31, 1999, a ten percent favorable shift in
interest rates alone to each swap would have resulted in an incremental
unrealized gain of $10 million. The converse events would have resulted in an
incremental unrealized loss of $10 million.
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. In addition, in 1999 the company began hedging
the U.S. dollar debt of its subsidiaries in Brazil by entering into forward
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
contracts to reduce the company's exposure to exchange rate fluctuations. 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, 1999, a ten percent unfavorable
exchange rate movement in the company's portfolio of foreign currency forward
contracts would have resulted in an incremental unrealized loss of $69 million
while a ten percent favorable shift would have resulted in an incremental
unrealized gain of $68 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 an outstanding option to buy Brazilian reais for USD at December 31, 1999. A
ten percent increase in the exchange rate would have resulted in an incremental
unrealized gain of $10 million while a ten percent decrease would have no
financial impact.
The company manages a portfolio of domestic interest rate swap contracts that
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, 1999, a ten percent increase or decrease in
interest rates would not have resulted in a material gain or loss. A ten percent
shift in copper and aluminum prices would have resulted in an incremental $2
million gain or loss.
Brasmotor's long-term debt carries a floating interest rate that periodically
reprices resulting in the carrying value approximating fair value. As of
December 31, 1999, 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.
EURO CURRENCY CONVERSION
On January 1, 1999, eleven member nations of the European Union began the
conversion to a common currency, the "euro." The company has significant
manufacturing operations and sales in these countries. The introduction of the
euro has eliminated transaction gains and losses within participating countries
and there currently has not been any significant impact on operating results
from the change over to the euro.
Prices to customers may converge throughout the affected countries, although the
company believes that in recent years competitive pressures have to some extent
eliminated price differences solely caused by the lack of price transparency.
Internal computer system and business processes will need to be changed to
accommodate the new currency. The company has established a cross-functional
team, guided by an executive-level steering committee, to address these issues.
It currently plans to make changes in two phases. In the first phase, from 1999
to 2001, the company will have the capability to bill customers and pay
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
suppliers in euro, but will continue to maintain its accounts in the national
currencies. In 2002, all remaining operational and financial systems will be
converted to the euro. The cost of the first phase is not material; the cost of
the second phase has not been estimated at this time.
Operating efficiencies should ultimately result from reduction of the complexity
of doing business in multiple currencies. No estimate of these efficiencies has
been made.
YEAR 2000
The company completed its Year 2000 readiness initiatives and did not experience
any significant problems at the beginning of 2000. The company does not
anticipate any adverse business effects related to this issue.
The company incurred approximately $21 million in cumulative costs of projects
dedicated solely to Year 2000 remediation.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. Management's
Discussion and Analysis and other sections of this report may contain forward-
looking statements that reflect our current views with respect to future events
and financial performance.
Certain statements contained in this annual report and other written and oral
statements made from time to time by the company do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "estimate," "expect," "intend," "may," "could,"
"possible," "plan," "project," "will," "forecast," and similar words or
expressions. The company's forward-looking statements generally relate to its
growth strategies, financial results, product development, and sales efforts.
These forward-looking statements should be considered with the understanding
that such statements involve a variety of risks and uncertainties, known and
unknown, and may be affected by inaccurate assumptions. Consequently, no
forward-looking statement can be guaranteed and actual results may vary
materially.
Many factors could cause actual results to differ materially from the Company's
forward-looking statements. Among these factors are: (1) competitive pressure to
reduce prices; (2) the ability to gain or maintain market share in an intensely
competitive global market; (3) the success of our global strategy to develop
brand differentiation and brand loyalty; (4) our ability to control operating
and selling costs and to maintain profit margins during industry downturns; (5)
the success of our Brazilian businesses operating in a challenging and volatile
environment; (6) continuation of our strong relationship with Sears, Roebuck and
Co. in North America which accounted for approximately 18% of our consolidated
net sales of $10.5 billion in 1999; (7) currency exchange rate fluctuations in
Latin America, Europe, and Asia that could affect our
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
consolidated balance sheet and income statement; and (8) social, economic, and
political volatility in developing markets.
The company undertakes no obligation to update every forward-looking statement,
and investors are advised to review disclosures by the company in our filings
with the Securities and Exchange Commission. It is not possible to foresee or
identify all factors that could cause actual results to differ from expected or
historic results. Therefore, investors should not consider the foregoing factors
to be an exhaustive statement of all risks, uncertainties, or factors that could
potentially cause actual results to differ.
9
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars, except 1999 1998 1997
per share data) ------- ------- ------
<S> <C> <C> <C>
Net sales............................................ $10,511 $10,323 $8,617
EXPENSES
Cost of products sold................................ 7,852 7,805 6,604
Selling and administrative........................... 1,753 1,791 1,625
Intangible amortization.............................. 31 39 34
Restructuring costs.................................. -- -- 343
------- ------- ------
9,636 9,635 8,606
------- ------- ------
OPERATING PROFIT................................... 875 688 11
OTHER INCOME (EXPENSE)
Interest and sundry.................................. (195) 136 (14)
Interest expense..................................... (166) (260) (168)
------- ------- ------
EARNINGS (LOSS) BEFORE INCOME TAXES AND OTHER
ITEMS............................................. 514 564 (171)
Income taxes (benefit)............................... 197 209 (9)
------- ------- ------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE
EQUITY EARNINGS AND MINORITY INTERESTS............ 317 355 (162)
Equity in affiliated companies....................... (4) 1 67
Minority interests................................... 34 (46) 49
------- ------- ------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS......... 347 310 (46)
Earnings (loss) from discontinued operations (less
applicable taxes)................................... -- -- (11)
Gain on disposal of discontinued operations (less
applicable taxes)................................... -- 15 42
------- ------- ------
NET EARNINGS (LOSS)................................ $ 347 $ 325 $ (15)
======= ======= ======
Per share of common stock:
Basic Earnings (loss) from continuing operations... $ 4.61 $ 4.09 $(0.62)
Basic Net earnings (loss).......................... $ 4.61 $ 4.29 $(0.20)
======= ======= ======
Diluted Earnings (loss) from continuing operations. $ 4.56 $ 4.06 $(0.62)
Diluted Net earnings (loss)........................ $ 4.56 $ 4.25 $(0.20)
======= ======= ======
Cash dividends..................................... $ 1.36 $ 1.36 $ 1.36
======= ======= ======
</TABLE>
See notes to consolidated financial statements.
10
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1999 1998
---- ----
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents............................................ $ 261 $ 636
Trade receivables, less allowances of (1999: $124; 1998: $116).. 1,477 1,711
Inventories..................................................... 1,065 1,100
Prepaid expenses and other...................................... 286 268
Deferred income taxes........................................... 88 167
------- -------
Total Current Assets........................................ 3,177 3,882
OTHER ASSETS
Investment in affiliated companies.............................. 112 108
Intangibles, net................................................ 795 936
Deferred income taxes........................................... 247 262
Other........................................................... 317 329
------- -------
1,471 1,635
PROPERTY, PLANT AND EQUIPMENT
Land............................................................ 70 77
Buildings....................................................... 863 900
Machinery and equipment......................................... 4,249 4,534
Allowance for Depreciation...................................... (3,004) (3,093)
------- -------
2,178 2,418
------- -------
Total Assets................................................ $ 6,826 $ 7,935
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable................................................... $ 444 $ 905
Accounts payable................................................ 1,081 1,079
Employee compensation........................................... 300 271
Accrued expenses................................................ 803 870
Restructuring costs............................................. 39 117
Current maturities of long-term debt............................ 225 25
------- -------
Total Current Liabilities................................... 2,892 3,267
OTHER LIABILITIES
Deferred income taxes........................................... 157 152
Postemployment benefits......................................... 612 622
Other liabilities............................................... 168 192
Long-term debt.................................................. 714 1,087
------- -------
1,651 2,053
MINORITY INTERESTS 416 614
STOCKHOLDERS' EQUITY
Common stock, $1 par value: 250 million shares authorized....... 84 83
Paid-in capital................................................. 374 321
Retained earnings............................................... 2,268 2,024
Unearned restricted stock....................................... (6) (3)
Cumulative translation adjustments.............................. (443) (183)
Treasury stock--9 and 6 million shares at cost in 1999 and 1.... (410) (241)
------- -------
Total Stockholders' Equity.................................. 1,867 2,001
------- -------
Total Liabilities and Stockholders' Equity.................. $ 6,826 $ 7,935
======= =======
</TABLE>
See notes to consolidated financial statements.
11
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1999 1998 1997
Year ended December 31 (millions of dollars) -------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss)............................. $ 347 $ 325 $ (15)
Depreciation.................................... 386 399 322
Deferred income taxes........................... 29 26 (208)
Equity in net earnings (loss) of affiliated
companies, less dividends received............. 4 (1) (51)
Gain on business dispositions................... -- (25) (70)
Provision for doubtful accounts................. 37 29 89
Amortization of goodwill........................ 31 39 34
Restructuring charges, net of cash paid......... (73) (99) 267
Minority interests.............................. (34) 46 (49)
Changes in assets and liabilities, net of
effects of business acquisitions and
dispositions:
Trade receivables............................. (41) (184) (145)
Inventories................................... (52) 73 177
Accounts payable.............................. 106 89 20
Other--net.................................... 61 46 222
-------- -------- --------
Cash Provided by Operating Activities........... $ 801 $ 763 $ 593
======== ======== ========
INVESTING ACTIVITIES
Net additions to properties..................... $ (437) $ (523) $ (378)
Net change in financing receivables and leases.. -- -- 706
Net assets of discontinued operations........... -- -- (562)
Acquisitions of businesses, less cash acquired.. -- (121) 179
Net increase (decrease) in investment in and
advances to affiliated companies............... -- -- 13
Business dispositions........................... -- 587 1,038
Other........................................... -- -- (8)
-------- -------- --------
Cash Provided by (Used for) Investing
Activities..................................... $ (437) (57) 988
======== ======== ========
FINANCING ACTIVITIES
Proceeds of short-term borrowings............... $ 15,479 19,141 31,487
Repayments of short-term borrowings............. (15,841) (19,519) (32,439)
Proceeds of long-term debt...................... 152 290 102
Repayments of long-term debt.................... (175) (306) (211)
Repayments of non-recourse debt................. -- -- (8)
Dividends....................................... (103) (102) (102)
Purchase of treasury stock...................... (167) -- --
Redemption of preferred stock................... -- (40) --
Other........................................... 59 (83) 47
-------- -------- --------
Cash (Used for) Financing Activities............ $ (596) (619) (1,124)
======== ======== ========
Effect of Exchange Rate Changes on Cash and
Equivalents.................................... $ (143) (29) (8)
======== ======== ========
Increase (Decrease) in Cash and Equivalents..... $ (375) 58 449
Cash and Equivalents at Beginning of Year....... 636 578 129
======== ======== ========
Cash and Equivalents at End of Year............. $ 261 $ 636 $ 578
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
12
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Treasury Accumulated
Stock / Other
Common Paid-in- Comprehensive Retained
Stock Capital Income Earnings Total
(millions of dollars) ------ -------- ------------- -------- -------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1997...... $ 81 $ 3 $ (76) $1,918 $ 1,926
Comprehensive income
Net Income................... (15) (15)
Foreign currency items, net
of tax of $36............... (73) (73)
-------
Comprehensive income........... (88)
-------
Common stock issued............ 1 34 35
Dividends declared on common
stock......................... (102) (102)
---- ---- ----- ------ -------
Balances, December 31, 1997.... $ 82 $ 37 $(149) $1,801 $ 1,771
Comprehensive income (loss)
Net income (loss)............ 325 325
Foreign currency items, net
of tax (benefit) of ($18)... (34) (34)
-------
Comprehensive income (loss).... 291
-------
Common stock issued............ 1 40 41
Dividends declared on common
stock......................... (102) (102)
---- ---- ----- ------ -------
Balances, December 31, 1998.... $ 83 $ 77 $(183) $2,024 $ 2,001
Comprehensive income
Net income................... 347 347
Foreign currency items, net
of tax (benefit) of ($41)... (260) (260)
-------
Comprehensive income........... 87
-------
Common stock repurchased....... (167) (167)
Common stock issued............ 1 48 49
Dividends declared on common
stock......................... (103) (103)
---- ---- ----- ------ -------
Balances, December 31, 1999.... $ 84 $(42) $(443) $2,268 $ 1,867
==== ==== ===== ====== =======
</TABLE>
See notes to consolidated financial statements.
13
<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
under 11 major brand names and markets products to distributors and retailers in
more than 170 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 1997, the company increased its voting ownership to a majority interest in
its Brazilian affiliate, Brasmotor S.A. 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 1997, the company discontinued its financial
services business; as a result, the statement of earnings, balance sheet and
cash flow reflect this business as a discontinued operation.
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 $266 million and $258 million at
December 31, 1999 and 1998. 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 $210 million, $209 million and $181 million
in 1999, 1998 and 1997.
Advertising Costs: Advertising costs are charged to expense as incurred. Such
costs from continuing operations were $164 million, $179 million and $155
million in 1999, 1998 and 1997.
Foreign Currency Translation: The functional currency for the company's
international subsidiaries and affiliates is the local currency. Prior to
January 1, 1998, Brazil was considered hyperinflationary and its results were
remeasured into U.S. dollars.
-7-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF PRINCIPAL ACCOUNTING POLICIES--CONTINUED
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) 1999 1998 1997
--------------------------
<S> <C> <C> <C>
Earnings (loss):
Numerator for earnings (loss) per share from
continuing operations $ 347 $ 310 $ (46)
Numerator for net earnings (loss) per share 347 325 (15)
Weighted-average shares outstanding:
Denominator for basic earnings (loss) per share 75.2 75.8 74.7
Effect of dilutive employee stock options 0.8 0.7 -
----- ----- ------
Denominator for diluted earnings (loss) per share 76.0 76.5 74.7
Basic earnings (loss) per share from continuing operations $4.61 $4.09 $(0.62)
Basic net earnings (loss) per share $4.61 $4.29 $(0.20)
Diluted earnings (loss) per share from continuing operations $4.56 $4.06 $(0.62)
Diluted net earnings (loss) per share $4.56 $4.25 $(0.20)
</TABLE>
(2) SUBSEQUENT EVENT
On January 7, 2000, the company completed its tender offer for the outstanding
publicly traded shares in Brazil of its subsidiaries Brasmotor S.A. (Brasmotor)
and Multibras S.A. Eletrodomesticos (Multibras). In completing the offer, the
company purchased additional shares of Brasmotor and Multibras for $283 million.
With this additional investment, the company's equity interest in its Brazilian
subsidiaries increased from approximately 55% to approximately 87%.
-9-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) BUSINESS ACQUISITIONS AND DISPOSITIONS
During 1998, the company purchased a 36% ownership stake in brandwise, LLC, a
newly established e-commerce shopping/comparison business. The joint venture
will provide consumers with the ability to purchase home accessories on their
internet site, brandwise.com. During 1999, the company contributed an additional
$6 million thereby maintaining its 36% ownership.
In September 1998, the company completed a transaction to sell 75% of its
majority-owned air conditioning joint venture in Shenzhen, China, for $13
million, to Electra Consumer Products Ltd., a leading European manufacturer of
air conditioners. Shenzhen Whirlpool Raybo Air-Conditioner Industrial Co. Ltd.
was a joint venture formed in 1995. After completion of the sale, the company
will continue to hold 20% of the joint venture. The joint venture will continue
to sell products under the Whirlpool brand in China for a period of three years
while it introduces the Electra brand. No significant gain or loss was
recognized from this transaction.
During 1998, the company increased its ownership stake in its Brazilian
subsidiaries by purchasing $43 million of additional shares.
In July 1998, the company purchased the remaining 35% ownership in Shunde SMC
Microwave Products Co., Ltd. (SMC), a Chinese manufacturer and marketer of
microwave ovens, for about $60 million in cash. The company now owns 100% of
SMC.
In March 1998, the company increased its majority ownership interest to 80% in
Whirlpool Narcissus Co., its Chinese joint venture that manufactures washing
machines, for approximately $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, gave the company a controlling interest of approximately
66% of the voting shares of Brasmotor. Brasmotor is the parent company of
Multibras, which has the leading market share position in Latin America, and
Empresa Brasileira de Compressores S.A. (Embraco), the world's second largest
hermetic compressor manufacturer.
In September 1997, the company reached a definitive agreement to sell the
inventory, consumer, and international financing businesses of Whirlpool
Financial Corporation (WFC) (refer to Note 4).
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.
(4) DISCONTINUED OPERATIONS
In 1997, the company discontinued its financing operations and reached an
agreement to sell the majority of WFC's assets in a series of transactions. The
company completed the following sales in 1997: certain inventory floor planning
financing assets, international factoring assets and certain consumer financing
receivables. The company recorded a discontinued pretax gain of $70 million
-10-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($42 million after-tax) related to these transactions. A $36 million pretax
operating charge ($22 million after-tax) was also recorded in 1997 to provide an
additional reserve for certain retained WFC aerospace assets.
During 1998, the company also sold the following assets which were previously
held by WFC: international factoring assets, consumer financing receivable
assets, certain aerospace financing assets and the European inventory financing
assets. These transactions resulted in the company recording a discontinued
pretax gain of $25 million ($15 million after-tax), and concluded the series of
sales transactions. Over the two years 1997 and 1998, the company recorded total
after-tax gains of $57 million or $.74 per diluted share related to these sale
transactions.
-11-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) INVENTORIES
<TABLE>
<CAPTION>
December 31 (millions of dollars) 1999 1998
--------------
<S> <C> <C>
Finished products $ 932 $ 960
Work in process 48 54
Raw materials 253 279
------ ------
1,233 1,293
Less excess of FIFO cost over LIFO cost 168 193
------ ------
Total inventories $1,065 $1,100
====== ======
</TABLE>
LIFO inventories represent approximately 28% and 23% of total inventories at
December 31, 1999 and 1998.
-12-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) 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 20% 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), its results were reflected as equity earnings of affiliated companies.
Equity in the net earnings (loss) of affiliated companies, net of related taxes,
is as follows:
(millions of dollars) 1999 1998 1997
-----------------------------
Brazilian affiliates $ - $(1) $60
Mexican affiliate 3 1 5
Other (7) 1 2
--- --- ---
Total equity earnings (loss) $(4) $ 1 $67
=== === ===
-13-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) FINANCING ARRANGEMENTS
The company enters into and utilizes numerous uncommitted credit lines from
banks and other financial institutions in the normal course of funding of its
operations. To ensure that the company has access to adequate and competitive
financing under unusual market conditions, the company also enters into
committed credit lines backed by formal agreements with counterparties deemed to
be reliable. At December 31, 1999, the company had committed credit lines of
approximately $919 million, of which $670 million was available, in place with
maturities ranging from one month to four years. 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:
December 31 (millions of dollars) 1999 1998
------------
Payable to banks $353 $732
Commercial paper 80 153
Other 11 20
---- ----
Total notes payable $444 $905
==== ====
The weighted average interest rate on notes payable was 6.86% and 7.60% at
December 31, 1999 and 1998.
Although its operating assets have been divested, WFC remains a legal entity
with preferred stock arrangements, included within minority interests in the
consolidated balance sheet, as follows:
Mandatory
Number Face Annual Redemption Date of
of Shares Value Dividend Date Issuance
--------- ----- -------- ---------- ----------
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
-14-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 is no sinking fund requirement for the Series C
preferred stock.
-15-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) 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.
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31 (millions of Dollars) Maturity Rate 1999 1998
---------- ------------ ------------------------
<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 2000 to 2006 8.9 to 9.1 21 25
Mortgage notes 2000 to 2012 6.3 to 6.6 62 64
Brazilian bank note 2000 to 2004 12.1 92 131
Other 137 164
----------- -----------
1,080 1,152
Less cross currency interest rate swap adjustments 141 40
Less current maturities 225 25
----------- -----------
Total long-term debt, net $ 714 $ 1,087
=========== ===========
</TABLE>
Annual maturities of long-term debt in the next five years, are $225 million,
$108 million, $52 million, $248 million and $48 million.
The company paid interest, including a portion recorded as discontinued
operations, on short-term and long-term debt totaling $151 million, $290 million
and $242 million in 1999, 1998 and 1997.
-16-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) 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.
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>
1999 1998
--------------------- ----------------------
Carrying Fair Carrying Fair
December 31 (millions of dollars) Amount Value Amount Value
<S> <C> <C> <C> <C>
----------------------------------------------------
Long-term debt (including current portion) $ 1,080 $ 1,098 $ 1,152 $ 1,257
Derivative financial instruments (notional
amounts indicated):
Hedges of net investment in Europe including
converted debt:
Interest rate and cross currency interest rate swaps
($1,026 million in 1999; $1,182 million in 1998) (141) (101) (40) (7)
Foreign currency forward contracts
($52 million in 1999; $19 million in 1998) - - - (1)
Domestic interest rate swap
($120 million in 1999: $120 million in 1998) - (1) - (2)
Transaction hedges:
Foreign currency forward and option contracts
($751 million in 1999; $424 million in 1998) - 12 - (9)
Hedges with commodity swaps
($14 million in 1999; $23 million in 1998) - (2) - (2)
----------------------------------------------------
Total long-term debt $ 939 $ 1,006 $ 1,112 $ 1,236
----------------------------------------------------
</TABLE>
-17-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS--CONTINUED
At December 31, 1999, interest rate and cross currency interest rate swaps
effectively converted $626 million of U.S. dollar denominated debt into European
currency denominations ($285 million - German marks, $261 million - French
francs, $28 million - Swiss francs, and $52 million - British pound sterling).
About 26% of this converted debt had floating rates and 74% had fixed rates.
Floating rates received ranged from LIBOR less .08% to LIBOR, and floating rates
paid ranged from local currency LIBOR to local currency LIBOR plus 3.09%. Fixed
rates received ranged from 5.93% to 7.20%, and fixed rates paid ranged from
5.13% to 7.98%. The swaps mature within seven years.
At December 31, 1999, one domestic interest rate swap effectively converts $120
million of fixed rate debt into floating rate debt. Fixed rates received were
6.99%. Floating rates paid were LIBOR. The domestic interest rate swap matures
within two years.
Foreign currency forward contracts mature within one day to two years and
involve principally European, Brazilian and North American currencies. Copper
and aluminum commodity swaps mature within two years.
-18-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) SHAREHOLDERS' EQUITY
On March 1, 1999, the company announced that its Board of Directors approved the
repurchase of up to $250 million of the company's outstanding shares of common
stock. The shares are to be purchased on the open market and through privately
negotiated sales as the company deems appropriate. Through December 31, 1999,
the company had repurchased 2,662,100 shares at a cost of $167 million.
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, 1999 included $17 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. 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 22, 2008, will become exercisable 10
days after a person or group (an Acquiring Person) has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding common
stock (the Trigger Date) or 10 business days after the commencement, or public
disclosure of an intention to commence, of a tender offer or exchange offer by a
person that could result in beneficial ownership of 15% or more of the
outstanding common stock. Each Right entitles the holder to purchase from the
company one one-thousandth of a share of a Junior Participating Preferred Stock,
Series B, par value $1.00 per share, of the company at a price of $300 per one
one-thousandth of a Preferred Share subject to adjustment.
If a person becomes an Acquiring Person, proper provision shall be made so that
each holder of a Right, other than Rights that are or were beneficially owned by
the Acquiring Person (which will thereafter be void), shall thereafter have the
right to receive upon exercise of such Right that number of shares of common
stock (or other securities) having at the time of such transaction a market
value of two times the exercise price of the Right. If a person becomes an
Acquiring Person and the company is involved in a merger or other business
combination transaction where the company is not the surviving corporation or
where common stock is changed or exchange or in a transaction or transactions in
which 50% or more of its consolidated assets or earning power are sold, proper
provision shall be made so that each holder of a Right (other than such
Acquiring Person) shall thereafter have the right to receive, upon the exercise
thereof tat the then current exercise price of the Right, that number of shares
of common stock of the acquiring company which at the time of such transaction
would have a market value of two times the exercise price of the Right. In
addition, if an Acquiring Person, does not have beneficial ownership of 50% or
more of the common stock, the company's Board of Directors has the option of
exchanging all or part of the Rights for an equal number of shares of common
stock in the manner described in the Rights Agreement.
Prior to the Trigger Date, the Board of Directors of the company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable in cash,
shares of common stock or any other consideration deemed appropriate by the
Board of Directors. Immediately upon action of the Board of Directors ordering
redemption of the Rights, the ability of holders to exercise the Rights will
terminate and such holders will only be able to receive the redemption price.
-19-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
The company covenants and agrees that it will cause to be reserved and kept
available at all times a sufficient number of shares of Preferred Stock (and
following the occurrence of a Triggering Event, shares of common stock and/or
other securities) to permit the exercise in full of all Rights from time to time
outstanding.
-20-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) STOCK OPTION AND INCENTIVE PLANS
The company's stock option and incentive plans permit the grant of stock options
and other stock awards covering up to 10.5 million shares to key employees of
the company and its subsidiaries, of which 3.2 million shares are available for
grant at December 31, 1999. The plans authorize the grant of both incentive and
nonqualified stock options and, further, authorize 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), a Career Stock Program
(CSP) and a Key Employee Retention Program (KERP) have been established under
the plans. Performance awards under ESAP, RSVP and KERP 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 and KERP grant 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 847,000 with a weighted-average grant-date fair value of $51.12
per share at December 31, 1999 and 731,000 with a weighted-average grant-date
fair value of $48.06 per share at December 31, 1998. Expenses under the plan
were $8 million, $17 million and $21 million in 1999, 1998 and 1997.
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. In addition, each nonemployee director is awarded annually
deferred compensation in the form of 400 shares of phantom stock, which is
converted into common stock on a one-for-one basis and paid when the director
leaves the Board. This plan provides for the grant of up to 300,000 shares as
either stock or stock options, of which 189,000 shares are available for grant
at December 31, 1999. The stock options vest and become exercisable six months
after date of grant. There were no significant expenses under this plan for
1999, 1998 or 1997.
The company maintains an employee stock option plan (PartnerShare) that may
grant 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, 1999.
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.
-21-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) 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:
December 31 (millions of dollars) 1999 1998 1997
---------------------
Net earnings (loss)
As reported $ 347 $ 325 $ (15)
Proforma 338 318 (21)
Diluted net earnings (loss) per share
As reported $4.56 $4.25 $(.20)
Proforma 4.45 4.16 (.28)
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
for 1999, 1998 and 1997: expected volatility factor of .255, .216 and .183;
dividend yield of 2.2%, 2.4% and 2.4%; risk-free interest rate of 6.4%, 4.5% and
5.5% and a weighted-average expected option life of 5 years for all three years.
-22-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) STOCK OPTION AND INCENTIVE PLANS--CONTINUED
A summary of stock option information follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------------------------------
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
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 4,120 $50.59 4,230 $47.06 4,127 $46.31
Granted 1,629 53.19 919 61.83 1,360 45.78
Exercised (960) 46.35 (770) 44.88 (842) 39.83
Canceled or expired (184) 55.30 (259) 49.81 (415) 50.12
--------- --------- ---------
Outstanding at December 31 4,605 $52.21 4,120 $50.59 4,230 $47.06
========= ========= ========= ========= ========= =========
Exercisable at December 31 2,611 $50.14 2,534 $47.65 2,308 $46.43
========= ========= ========= ========= ========= =========
Fair value of options
granted during the year $14.59 $12.67 $ 9.26
========= ========= =========
</TABLE>
The outstanding options at December 31, 1999, had exercise prices ranging from
$24.75 to $72.34 and a weighted-average remaining contractual life of 7.3 years.
-23-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) RESTRUCTURING AND OTHER SPECIAL CHARGES
During 1997, the company incurred restructuring costs of $343 million ($244
million cash costs and $99 million noncash costs) 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, respectively. More than 87% of the cash
costs have been paid to date, with the remainder to be paid in 2000. The
restructuring charge includes the elimination of 7,900 global positions of which
more than 7,300 positions have eliminated to date. 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 $0.54 per diluted share. In addition,
discontinued operations results included a pretax charge of $36 million, after-
tax charge of $22 million or $0.29 per diluted share to provide a reserve for
certain WFC aerospace assets.
-24-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) INCOME TAXES
Income tax provisions from continuing operations are as follows:
Year ended December 31 (millions of dollars) 1999 1998 1997
--------------------
Current:
Federal $148 $132 $ 78
State and local 25 22 20
Foreign 52 40 26
---- ---- ----
225 194 124
Deferred:
Federal (2) 10 (27)
State and local - 6 (3)
Foreign (26) (1) (103)
---- ---- ----
(28) 15 (133)
---- ---- ----
Total income tax provision (benefit) $197 $209 $ (9)
==== ==== ====
Domestic and foreign earnings (loss) before income taxes and other items from
continuing operations are as follows:
Year ended December 31 (millions of dollars) 1999 1998 1997
--------------------
Domestic $524 $407 $ 288
Foreign (10) 157 (459)
---- ---- -----
Total earnings (loss) before taxes and other items $514 $564 $(171)
==== ==== =====
Earnings (loss) before income taxes and other items, including discontinued
operations (refer to Note 4), were $514 million, $589 million and $(178) million
for 1999, 1998 and 1997, respectively.
-25-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) 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:
Year ended December 31 1999 1998 1997
----------------------
U.S. federal statutory rate 35.0% 35.0% (35.0)%
Impact of restructuring charge - - 18.2
State and local taxes, net of
federal tax benefit 5.5 5.3 8.8
Nondeductible goodwill amortization 1.6 1.5 2.3
Excess foreign taxes (benefits) (1.1) (1.0) (4.0)
Unrecognized prior year foreign deferred
tax assets and carryforwards (1.7) (1.9) (5.1)
Foreign dividends and subpart F income 2.8 2.2 (5.9)
Foreign government tax incentive (0.2) (4.0) -
Unbenefited operating losses 2.1 3.3 10.9
Permanent differences (6.3) 0.8 (4.5)
Other items 0.5 (4.1) 9.3
---- ---- ----
Effective income tax (benefit) rate 38.2% 37.1% (5.0)%
==== ==== ====
Inclusive of discontinued operations, the effective income tax (benefit) rate
was 38.2%, 37.3% and (6.9)% for 1999, 1998 and 1997, 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.
-26-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) INCOME TAXES--CONTINUED
Significant components of the company's deferred tax liabilities and assets are
as follows:
December 31 (millions of dollars) 1999 1998
---- ----
Deferred tax liabilities:
Property, plant and equipment $109 $158
Financial services leveraged leases 124 125
Software costs 28 15
Contested liabilities 34 -
Other 128 37
---- ----
Total deferred tax liabilities 423 335
Deferred tax assets
Postretirement obligation 176 170
Restructuring costs 24 58
Product warranty accrual 26 33
Receivable and inventory allowances 81 33
Loss carryforwards 152 148
Employee compensation 45 39
Other 55 82
---- ----
Total deferred tax assets 559 563
Valuation allowances for deferred tax assets (18) (19)
---- ----
Deferred tax assets, net of valuation allowances 541 544
---- ----
Net deferred tax assets $118 $209
==== ====
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 ($482 million at December 31, 1999) 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 $235 million in 1999, $239 million in 1998 and
$23 million in 1997. The increase in 1998 is due to increased earnings as 1997
included $343 million in pretax restructuring charges.
-27-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1999, the company has foreign net operating loss carryforwards
of $362 million, which are primarily nonexpiring.
(13) PENSION AND POSTRETIREMENT MEDICAL BENEFITS 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
The company also currently sponsors a defined benefit health-care plan that
provides postretirement medical benefits to full time U.S. employees who have
worked 10 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 medical benefits are provided by the company
to non-U.S. employees.
-28-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension Benefits
------------------------
(millions of dollars) 1999 1998 1997
------------------------
Change in benefit obligations:
Benefit obligation as of January 1 $1,344 1,255 1,057
Service cost 50 49 41
Interest cost 98 91 84
Plan participants' contributions 1 1 1
Amendments 7 30 35
Business combinations 0 0 160
Actuarial (gain) loss (114) 28 36
Benefits paid (93) (86) (152)
Curtailments 0 (14) (14)
Special termination benefits (2) (2) 17
Foreign currency exchange rate changes (49) (8) (10)
------------------------
Benefit obligation as of December 31 $1,242 1,344 1,255
------------------------
Change in plan assets:
Fair value of plan assets as of January 1 $1,672 1,452 1,322
Actual return on plan assets 644 292 207
Business combinations 0 0 72
Employer contributions 12 17 7
Plan participants' contributions 1 1 1
Benefits paid (93) (86) (152)
Foreign currency exchange rate changes (35) (4) (5)
------------------------
Fair value of plan assets as of December 31 $2,201 1,672 1,452
------------------------
-29-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pension Benefits
-----------------------------------------
<S> <C> <C> <C>
(millions of dollars) 1999 1998 1997
-----------------------------------------
Reconciliation of prepaid (accrued) cost
and total amount to be recognized:
Funded status as of December 31 $ 959 328 197
Unrecognized actuarial (gain) (1,087) (471) (365)
Unrecognized prior service cost 73 71 83
Unrecognized transition asset 11 22 33
-----------------------------------------
Prepaid (accrued) cost as of December 31 $ (44) (50) (52)
-----------------------------------------
Prepaid cost at December 31 85 114 98
Accrued benefit liability at December 31 (138) (173) (159)
Intangible asset 2 2 3
Other 7 7 6
-----------------------------------------
Total recognized as of December 31 $ (44) (50) (52)
-----------------------------------------
Weighted average assumption as of December 31:
Discount rate 5.0 to 11.3% 5.5 to 9.0% 6.0 to 9.0%
Expected return on assets 6.0 to 11.3% 6.0 to 9.5% 4.5 to 9.5%
Rate of compensation increase 2.5 to 8.0% 2.0 to 8.0% 2.5 to 9.0%
Components of net periodic benefit cost:
Service cost $ 50 49 41
Interest cost 98 91 84
Expected return on plan assets (127) (112) (103)
Recognized actuarial (gain) (7) (8) (7)
Amortization of prior service cost 9 9 8
Amortization of transition assets (1) 0 (3)
-----------------------------------------
Net periodic benefit cost 22 29 20
-----------------------------------------
Curtailments 0 (7) (13)
Special termination benefits (1) 2 17
Settlements 0 (3) (29)
-----------------------------------------
Total cost $ 21 21 (5)
-----------------------------------------
</TABLE>
-30-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Postretirement Medical Benefits
-------------------------------
1999 1998 1997
(millions of dollars) -------------------------------
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation as of January 1 $ 428 388 382
Service cost 10 10 10
Interest cost 30 29 29
Actuarial (gain) loss (34) 22 (15)
Benefits paid (20) (21) (18)
-------------------------------
Benefit obligation as of December 31 $ 414 428 388
-------------------------------
Change in plan assets:
Fair value of plan assets as of January 1 0 0 0
Employer contributions 20 21 18
Benefits paid (20) (21) (18)
-------------------------------
Fair value of plan assets as of December 31 $ 0 0 0
-------------------------------
Reconciliation of prepaid (accrued) cost
and total amount recognized:
Funded status as of December 31 $(414) (428) (388)
Unrecognized actuarial (gain) loss (27) 8 (14)
-------------------------------
Prepaid (accrued) cost as of December 31 $(441) (420) (402)
-------------------------------
Prepaid cost at December 31 0 0 0
Accrued benefit liability at December 31 (441) (420) (402)
-------------------------------
Total recognized as of December 31 $(441) (420) (402)
-------------------------------
Weighted average assumption as of December 31:
Discount rate 8.00% 7.25% 7.75%
Medical costs trend rate:
For year ending December 31 7.00% 7.00% 8.00%
Ultimate (year 2000) 6.00% 6.00% 6.00%
Components of net periodic benefit cost:
Service cost $ 10 10 10
Interest cost 30 29 29
-------------------------------
Net periodic benefit cost 40 39 39
-------------------------------
Total cost $ 40 39 39
-------------------------------
</TABLE>
31
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The medical cost trend rate significantly affects the reported postretirement
benefit cost and benefit obligations. A one-percentage-point change in the
assumed health care trend rate would have the following effects:
<TABLE>
<CAPTION>
One- One-
(millions of dollars) percentage- percentage-
point increase point decrease
-------------- --------------
<S> <C> <C>
Effect on total service cost and interest cost components $ 3 (3)
Effect on postretirement benefit obligation $29 (28)
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $80 million, $71 million and $5 million,
respectively, as of December 31, 1999, $86 million, $67 million and $6 million,
respectively, as of December 31, 1998, and $312 million, $221 million and $140
million, respectively, as of December 31, 1997.
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.
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 $9
million, $7 million and $6 million in 1999, 1998 and 1997.
-32-
<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, 1999 the company had $277 million in receivables subject to
recourse provisions and $169 million in guarantees of customer lines of credit
at commercial banks.
At December 31, 1999, the company had noncancelable operating lease commitments
totaling $234 million. The annual future minimum lease payments are detailed in
the table below.
Annual
(dollars in millions) Expense
- --------------------- -------
2000 $ 62
2001 43
2002 35
2003 29
2004 27
Thereafter 38
----
$234
====
The company's rent expense was $87 million, $81 million and $82 million for the
years 1999, 1998 and 1997, respectively.
-33-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated on a regular basis
by the chief operating decision maker, or decision making group, in deciding how
to allocate resources to an individual segment and in assessing performance of
the segment.
The company identifies such segments based upon geographical regions of
operations because each operating segment manufactures home appliances and
related components, but serves strategically different markets. The chief
operating decision maker evaluates performance based upon each segment's
operating income, which is defined as income before interest income or interest
expense, taxes and minority interests. Intersegment sales and transfers are
generally at current market prices, as if the sales or transfers were to third
parties. The "Other" segment primarily includes corporate expenses and
eliminations.
The company generally evaluates business segments based on net sales, not
including intersegment appliance sales. Intersegment sales are included in
Other/Eliminations. Total assets are those assets directly associated with the
respective operating activities. Other assets consist principally of assets
related to corporate activities, including the assets of discontinued operations
held for sale in 1997.
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 18%, 17% and 20% of consolidated net sales in
1999, 1998 and 1997. Related receivables were 22%, 16% and 17% of consolidated
trade receivables for December 31, 1999, 1998 and 1997.
The company conducts business in two countries which individually comprised over
ten percent of consolidated net sales and total assets within the last three
years. The United States represented 54%, 50% and 57% of net sales for 1999,
1998 and 1997, respectively, while Brazil totalled 15% and 19% for 1999 and
1998. As a percentage of total assets, the United States accounted for 65%, 57%
and 53% at the end of 1999, 1998 and 1997. Brazil accounted for 24%, 31% and 31%
of total assets at the end of 1999, 1998 and 1997, respectively. The company's
Brazilian affiliates were consolidated in November of 1997 and therefore only in
the total asset calculation for 1997.
-34-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) BUSINESS SEGMENT INFORMATION-CONTINUED
<TABLE>
<CAPTION>
North Latin Other/ Total
America Europe America Asia Eliminations Whirlpool
------- ------ ------- ---- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
1999 6,159 2,452 1,668 375 (143) 10,511
1998 5,599 2,439 2,090 313 (118) 10,323
1997 5,263 2,343 447 400 164 8,617
Intangible amortization:
1999 3 16 2 5 5 31
1998 3 16 6 4 10 39
1997 3 16 1 4 10 34
Depreciation:
1999 151 88 95 21 31 386
1998 143 94 126 15 21 399
1997 145 110 3 13 51 322
Restucturing costs
and operating charges:
1999 - - - - - -
1998 - - - - - -
1997 - - - - 396 396
Operating profit (loss):
1999 725 177 120 13 (160) 875
1998 630 122 120 (17) (167) 688
1997 546 54 22 (62) (549) 11
Total assets:
1999 2,254 1,921 1,653 719 279 6,826
1998 2,091 2,298 2,499 722 325 7,935
1997 2,046 1,999 2,403 672 1,150 8,270
Capital expenditures:
1999 227 77 110 9 14 437
1998 188 78 239 25 12 542
1997 128 84 49 100 17 378
</TABLE>
-35-
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<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>
1999
Net sales $ 2,689 $ 2,719 $ 2,617 $ 2,486
Cost of products sold $ 1,983 $ 2,036 $ 1,967 $ 1,866
Earnings from continuing operations $ 113 $ 107 $ 99 $ 28
Net earnings $ 113 $ 107 $ 99 $ 28
Per share of common stock:
Basic earnings from continuing operations $ 1.52 $ 1.42 $ 1.32 $ .37
Basic net earnings $ 1.52 $ 1.42 $ 1.32 $ .37
Diluted earnings from continuing operations $ 1.51 $ 1.40 $ 1.30 $ .36
Diluted net earnings $ 1.51 $ 1.40 $ 1.30 $ .36
Dividends paid $ .34 $ .34 $ .34 $ .34
Stock price:
High 73.56 78.25 74.00 57.00
Low 56.75 61.25 50.50 40.94
Close 65.06 65.31 74.00 54.38
</TABLE>
The first quarter earnings and earnings per share were reduced $60 million
after-taxes and minority interest, or $0.79 per share, by the first quarter's
Brazilian currency devaluation.
36
<PAGE>
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(15) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)*--CONTINUED
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------
December 31 September 30 June 30 March 31
------------ ------------ --------- ----------
<S> <C> <C> <C> <C>
(millions of dollars, except per
share data)
1998
Net sales $ 2,735 $ 2,539 $ 2,585 $ 2,464
Cost of products sold $ 2,045 $ 1,929 $ 1,962 $ 1,869
Eamings (loss) from continuing
operations $ 83 $ 78 $ 81 $ 68
Net earnings (loss) $ 83 $ 78 $ 84 $ 80
Per share of common stock:
Basic earnings (loss) from continuing
operations $ 1.10 $ 1.03 $ 1.07 $ .91
Basic net earnings (loss) $ 1.10 $ 1.03 $ 1.11 $ 1.06
Diluted earnings (loss) from
continuing operations $ 1.09 $ 1.02 $ 1.05 $ .90
Diluted net earnings (loss) $ 1.09 $ 1.02 $ 1.10 $ 1.05
Dividends paid $ .34 $ .34 $ .34 $ .34
Stock price
High 59.50 69.94 75.25 70.00
Low 43.69 45.00 62.44 50.38
Close 55.38 47.00 68.75 68.69
</TABLE>
37
<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, 1999 and 1998, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. 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 1998 and 1997 financial statements of Brasmotor S.A. and its
consolidated subsidiaries, whose statements reflect total assets of $2,500
million as of December 31, 1998 and net earnings of $58 million and $41 million
for the years ended December 31, 1998 and 1997, respectively. Those statements
were audited by other auditors which 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 on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, for 1998 and 1997, 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, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Chicago, Illinois
January 20, 2000
-38-
<PAGE>
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 LLP,
independent auditors, whose report, based upon their audits, expresses the
opinion that these financial statements present fairly the consolidated
financial position, results of operations and cash flows of Whirlpool and its
subsidiaries in accordance with accounting principles generally accepted in the
United States. Their audits are conducted in conformity with auditing standards
generally accepted in the United States.
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 five 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.
Mark E. Brown
Executive Vice President and Chief Financial Officer
February 12, 2000
-39-
<PAGE>
11 YEAR CONSOLIDATED STATISTICAL REVIEW
<TABLE>
<CAPTION>
(millions of dollars
except share and employee
data) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------- ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Net sales.............. $10,511 $10,323 $ 8,617 $8,523 $8,163 $7,949 $7,368 $7,097 $6,550 $6,424 $6,138
------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Operating profit(1).... $ 875 $ 688 $ 11 $ 278 $ 366 $ 370 $ 504 $ 447 $ 353 $ 300 $ 377
Earnings (loss) from
continuing operations
before income taxes
and other items....... $ 514 $ 564 $ (171) $ 100 $ 214 $ 269 $ 418 $ 334 $ 256 $ 177 $ 281
Earnings (loss) from
continuing operations. $ 347 $ 310 $ (46) $ 141 $ 195 $ 147 $ 257 $ 179 $ 139 $ 45 $ 169
Earnings (loss) from
discontinued
operations(2)......... $ -- $ 15 $ 31 $ 15 $ 14 $ 11 $ (28) $ 26 $ 31 $ 27 $ 18
Net earnings (loss)(3). $ 347 $ 325 $ (15) $ 156 $ 209 $ 158 $ 51 $ 205 $ 170 $ 72 $ 187
------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net capital
expenditures.......... $ 437 $ 523 $ 378 $ 336 $ 483 $ 418 $ 309 $ 288 $ 287 $ 265 $ 208
Depreciation........... $ 386 $ 399 $ 322 $ 318 $ 282 $ 246 $ 241 $ 275 $ 233 $ 247 $ 222
Dividends.............. $ 103 $ 102 $ 102 $ 101 $ 100 $ 90 $ 85 $ 77 $ 76 $ 76 $ 76
------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
CONSOLIDATED FINANCIAL
POSITION
Current assets......... $ 3,177 $ 3,882 $ 4,281 $3,812 $3,541 $3,078 $2,708 $2,740 $2,920 $2,900 $2,889
Current liabilities.... $ 2,892 $ 3,267 $ 3,676 $4,022 $3,829 $2,988 $2,763 $2,887 $2,931 $2,651 $2,251
Working capital........ $ 285 $ 615 $ 605 $ (210) $ (288) $ 90 $ (55) $ (147) $ (11) $ 249 $ 638
Property, plant and
equipment-net......... $ 2,178 $ 2,418 $ 2,375 $1,798 $1,779 $1,440 $1,319 $1,325 $1,400 $1,349 $1,288
Total assets........... $ 6,826 $ 7,935 $ 8,270 $8,015 $7,800 $6,655 $6,047 $6,118 $6,445 $5,614 $5,354
Long-term debt......... $ 714 $ 1,087 $ 1,074 $ 955 $ 983 $ 885 $ 840 $1,215 $1,528 $ 874 $ 982
Stockholders' equity... $ 1,867 $ 2,001 $ 1,771 $1,926 $1,877 $1,723 $1,648 $1,600 $1,515 $1,424 $1,421
------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
PER SHARE DATA
Basic earnings (loss)
from continuing
operations before
accounting change..... $ 4.61 $ 4.09 $ (0.62) $ 1.90 $ 2.64 $ 1.98 $ 3.60 $ 2.55 $ 2.00 $ 0.65 $ 2.44
Diluted earnings (loss)
from continuing
operations before
accounting change..... $ 4.56 $ 4.06 $ (0.62) $ 1.88 $ 2.60 $ 1.95 $ 3.47 $ 2.46 $ 1.98 $ 0.65 $ 2.44
Diluted net earnings
(loss)(3)............. $ 4.56 $ 4.25 $ (0.20) $ 2.08 $ 2.78 $ 2.10 $ 0.71 $ 2.81 $ 2.41 $ 1.04 $ 2.70
Dividends.............. $ 1.36 $ 1.36 $ 1.36 $ 1.36 $ 1.36 $ 1.22 $ 1.19 $ 1.10 $ 1.10 $ 1.10 $ 1.10
Book value............. $ 24.55 $ 26.16 $ 23.71 $25.93 $25.40 $23.21 $23.17 $22.91 $21.78 $20.51 $20.49
Closing Stock Price--
NYSE.................. $ 65.06 $ 55.38 $ 55.00 $46.63 $53.25 $50.25 $66.50 $44.63 $38.88 $23.50 $33.00
------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
KEY RATIOS(4)
Operating profit
margin................ 8.3% 6.7% 0.1% 3.3% 4.5% 4.7% 6.8% 6.3% 5.4% 4.7% 6.1%
Pre-tax margin(5)...... 4.9% 5.5% (2.0)% 1.2% 2.6% 3.4% 5.7% 4.7% 3.9% 2.8% 4.6%
Net margin(6).......... 3.3% 3.0% (0.5)% 1.7% 2.4% 1.8% 3.5% 2.5% 2.1% 0.7% 2.8%
Return on average
stockholders'
equity(7)............. 17.9% 17.2% (0.8)% 8.2% 11.6% 9.4% 14.2% 13.1% 11.6% 5.1% 13.7%
Return on average total
assets(8)............. 4.2% 4.6% (0.7)% 1.8% 3.0% 2.8% 4.0% 3.3% 2.9% 1.4% 4.9%
Current assets to
current liabilities... 1.1 1.2 1.2 0.9 0.9 1.0 1.0 0.9 1.0 1.1 1.3
Total debt-appliance
business as a percent
of invested
capital(9)............ 37.7% 43.5% 46.1% 44.2% 45.2% 35.6% 33.8% 42.8% 46.7% 39.1% 39.2%
Price earnings ratio... 14.3 13.0 -- 22.4 19.2 23.9 21.2 15.9 16.1 22.6 12.2
Interest coverage(10).. 4.1 3.2 0.0 1.6 2.7 3.6 5.0 3.5 3.0 2.3 3.5
------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
(millions of dollars
except share and employee
data) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Number of common shares
outstanding (in
thousands):
Average--on a diluted
basis.................. 76,044 76,507 74,697 77,178 76,812 77,588 76,013 75,661 72,581 69,595 69,461
Year-end............... 74,463 76,089 75,262 74,415 74,081 73,845 73,068 70,027 69,640 69,465 69,382
Number of stockholders
(year-end)............. 12,531 13,584 10,171 11,033 11,686 11,821 11,438 11,724 12,032 12,542 12,454
Number of employees
(year-end)............. 61,066 58,630 61,370 48,163 45,435 39,016 39,590 38,520 37,886 36,157 39,411
Total return to
shareholders (five year
annualized)(11)........ 7.9% -1.2% 6.8% 6.3% 20.8% 12.0% 25.8% 17.0% 6.7% 2.8% 11.3%
</TABLE>
- --------
(1) Restructuring and special operating charges were $405 million in 1997
(refer to note 11), $30 million in 1996, and $250 million in 1994.
(2) The Company's financial services business was discontinued in 1997.
(3) Includes cumulative effect of accounting changes: 1993-Accounting for
postretirement benefits other than pensions of ($180) million or ($2.42)
per diluted share.
(4) Excluding the first quarter impact of the Brazilian currency devaluation
in 1999 and the gain from discontinued operations in 1998, returns on
average stockholders' equity were 19.9% and 16.5%, and returns on average
total assets were 5.7% and 4.3%.
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, as a percent of sales.
(7) Net earnings (loss) before accounting change, divided by average
stockholders' equity.
(8) Net earnings (loss) before accounting change, plus minority interest
divided by average total assets.
(9) Debt divided by debt, stockholders' equity and minority interests.
(10) Ratio of earnings from continuing operations (before income taxes,
accounting change and interest expense) to interest expense.
(11) Stock appreciation plus reinvested dividends.
41
<PAGE>
Exhibit 21
Subsidiaries
------------
Subsidiary and Name Jurisdiction In
Under Which It Does Business Which Organized
- ---------------------------- ---------------
Whirlpool Europe B.V. The Netherlands
Whirlpool Properties, Inc. Michigan
Whirlpool Financial Corporation Delaware
Brasmotor S.A. Brazil
Multibras S.A. Eletrodomesticos Brazil
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, 1999.
<PAGE>
Exhibit 23ii(a)
CONSENT OF ERNST & YOUNG LLP
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, 333-02825, 333-66211 and 333-77167 of Whirlpool Corporation and
Registration Statement Nos. 33-26680 and 33-53196 of Whirlpool Corporation
pertaining to the Whirlpool Savings Plan and Registration Statement No.
333-66163 of Whirlpool Corporation pertaining to the Whirlpool 401(K) Plan of
our report dated January 20, 2000, 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, 1999.
Chicago, Illinois
March 15, 2000
<PAGE>
Consent of Independent Accounts
We hereby consent to the Incorporation by reference in the Registration
Statement nos. 33-34490, 33-34037, 33-21360, 33-00201, 2-64261, 33-05904,
33-40249, 33-43823, 333-02827, 333-02825, 333-66211, and 333-77167 of Whirlpool
Corporation and Registration Statement nos. 33-26680 and 33-53196 of Whirlpool
Corporation pertaining to the Whirlpool Savings Plan and Registration Statement
no. 333-66163 of Whirlpool Corporation pertaining to the Whirlpool 401(K) Plan
of our reports dated January 18, 1999 with respect to the consolidated financial
statements of Brasmotor S.A. and its subsidiaries, Multibras S.A.
Elecrodomesticos and its susidiaries and Empresa Brasileira de Compressores
S.A.-EMBRACO and its subsidiaries, included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Auditores Independentes
Sao Paulo, Brazil
March 17, 2000
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<PAGE>
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<FISCAL-YEAR-END> DEC-31-1999
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0
0
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<PERIOD-END> DEC-31-1998
<CASH> 636
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<RECEIVABLES> 1,711
<ALLOWANCES> 116
<INVENTORY> 1,100
<CURRENT-ASSETS> 3,882
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0
0
<COMMON> 83
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
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<SECURITIES> 0
<RECEIVABLES> 1,565
<ALLOWANCES> 156
<INVENTORY> 1,170
<CURRENT-ASSETS> 4,281
<PP&E> 5,262
<DEPRECIATION> 2,887
<TOTAL-ASSETS> 8,270
<CURRENT-LIABILITIES> 3,676
<BONDS> 1,074
0
0
<COMMON> 82
<OTHER-SE> 1,689
<TOTAL-LIABILITY-AND-EQUITY> 8,270
<SALES> 8,617
<TOTAL-REVENUES> 8,617
<CGS> 6,604
<TOTAL-COSTS> 8,229
<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-BASIC> (0.20)
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</TABLE>
