-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VJG6Vva+hMYuDXnrLgGZkJPxAgQqvapug3yowdo/p34AqwHCevAh2mB+Rv46bebb TVKg6bO7Py6tgRmynPWXIg== 0000950131-95-002187.txt : 19950814 0000950131-95-002187.hdr.sgml : 19950814 ACCESSION NUMBER: 0000950131-95-002187 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHIRLPOOL CORP /DE/ CENTRAL INDEX KEY: 0000106640 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD APPLIANCES [3630] IRS NUMBER: 381490038 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03932 FILM NUMBER: 95561547 BUSINESS ADDRESS: STREET 1: WHIRLPOOL CNTR 2000 M 63 STREET 2: C/O CORPORATE SECRETARY CITY: BENTON HARBOR STATE: MI ZIP: 49022 BUSINESS PHONE: 6169265000 MAIL ADDRESS: STREET 1: WHIRLPOOL CTR 2000 M 63 STREET 2: C/O CORPORATE SECRETARY CITY: CENTON HARBOR STATE: MI ZIP: 49022 FORMER COMPANY: FORMER CONFORMED NAME: WHIRLPOOL SEEGER CORP DATE OF NAME CHANGE: 19710824 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 Commission file number 1-3932 WHIRLPOOL CORPORATION (Exact name of registrant as specified in its charter) Delaware 38-1490038 (State of incorporation) (I.R.S. Employer Identification No.) 2000 M-63 Benton Harbor, Michigan 49022-2692 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 616/923-5000 The registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class of common stock Shares outstanding at June 30, 1995 --------------------- ----------------------------------- Common stock, par value $1 per share 73,859,110 PAGE 1 OF 21 QUARTERLY REPORT ON FORM 10-Q ----------------------------- WHIRLPOOL CORPORATION --------------------- Quarter Ended June 30, 1995 INDEX OF INFORMATION INCLUDED IN REPORT Page ---- PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited) Consolidated Condensed Statements of Earnings 3 Consolidated Condensed Balance Sheets 5 Consolidated Condensed Statements of Cash Flows 7 Notes to Consolidated Condensed Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II - OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 2
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q2Q WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 8/10/95 THREE MONTHS ENDED June 30 (millions of dollars except share data) Supplemental Consolidating Data ----------------------------------------- Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) ------------------- ------------------- ------------------- 1995 1994 1995 1994 1995 1994 --------- --------- --------- --------- --------- --------- REVENUES Net sales $2,069 $2,013 $2,069 $2,013 $- $- Financial services 46 37 - - 56 45 ------ ------ ------ ------ --- --- 2,115 2,050 2,069 2,013 56 45 EXPENSES Cost of products sold 1,590 1,515 1,590 1,515 - - Selling and administrative 404 373 384 355 30 26 Financial services interest 17 12 - - 20 15 Intangible amortization 8 6 8 6 - - Gain on disposition - (34) - (34) - - Restructuring costs - 4 - 4 - - ------ ------ ------ ------ --- --- 2,019 1,876 1,982 1,846 50 41 ------ ------ ------ ------ --- --- OPERATING PROFIT 96 174 87 167 6 4 OTHER INCOME (EXPENSE) Interest and sundry 2 8 - 5 2 3 Interest expense (34) (26) (31) (23) - - ------ ------ ------ ------ --- --- EARNINGS BEFORE TAXES AND OTHER ITEMS 64 156 56 149 8 7 Income Taxes 27 81 24 79 3 2 ------ ------ ------ ------ --- --- EARNINGS BEFORE EQUITY EARNINGS AND OTHER ITEMS 37 75 32 70 5 5 Equity in WFC - - 4 4 - - Equity in affiliated companies 16 12 16 12 - - Minority interests (1) (3) - (2) (1) (1) ------ ------ ------ ------ --- --- NET EARNINGS $ 52 $ 84 $ 52 $ 84 $ 4 $ 4 ====== ====== ====== ====== === ==== Per share of Common Stock: Primary earnings $ 0.70 $ 1.10 ====== ====== Fully diluted earnings $ 0.70 $ 1.09 ====== ====== Cash dividends $0.340 $0.305 ====== ======
See notes to consolidated condensed financial statements 3
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q2Y WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 8/10/95 SIX MONTHS ENDED June 30 (millions of dollars except share data) Supplemental Consolidating Data ----------------------------------------- Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) ------------------- ------------------- ------------------- 1995 1994 1995 1994 1995 1994 --------- --------- --------- --------- --------- --------- REVENUES Net sales $4,008 $3,845 $4,008 $3,845 $ - $- Financial services 92 75 - - 108 89 ------ ------ ------ ------ ---- --- 4,100 3,920 4,008 3,845 108 89 EXPENSES Cost of products sold 3,028 2,880 3,028 2,880 - Selling and administrative 800 720 756 685 60 49 Financial services interest 33 25 - - 38 30 Intangible amortization 14 11 14 11 - - Gain on disposition - (34) - (34) - - Restructuring costs - 4 - 4 - - ------ ------ ------ ------ ---- --- 3,875 3,606 3,798 3,546 98 79 ------ ------ ------ ------ ---- --- OPERATING PROFIT 225 314 210 299 10 10 OTHER INCOME (EXPENSE) Interest and sundry - 9 (6) 6 6 3 Interest expense (63) (53) (58) (48) - - ------ ------ ------ ------ ---- --- EARNINGS BEFORE TAXES AND OTHER ITEMS 162 270 146 257 16 13 Income Taxes 66 127 60 123 6 4 ------ ------ ------ ------ ---- --- EARNINGS BEFORE EQUITY EARNINGS AND OTHER ITEMS 96 143 86 134 10 9 Equity in WFC - - 8 7 - - Equity in affiliated companies 34 15 34 15 - - Minority interests (3) (7) (1) (5) (2) (2) ------ ------ ------ ------ ---- --- NET EARNINGS $ 127 $ 151 $ 127 $ 151 $ 8 $ 7 ====== ====== ====== ====== ==== === Per share of Common Stock: Primary earnings $ 1.70 $ 2.00 ====== ====== Fully diluted earnings $ 1.68 $ 1.97 ====== ====== Cash dividends $0.680 $0.610 ====== ======
See notes to consolidated condensed financial statements 4
PART I. FINANCIAL INFORMATION - -------------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS File: 8SQ1695.XLS WHIRLPOOL CORPORATION AND SUBSIDIARIES JLA 7/31/95 (millions of dollars) Supplemental Consolidating Data -------------------------------------------------- Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) ------------------------ ------------------------ ------------------------ June 30 December 31 June 30 December 31 June 30 December 31 1995 1994 1995 1994 1995 1994 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) ----------- ----------- ----------- ----------- ----------- ----------- ASSETS CURRENT ASSETS Cash and equivalents $ 128 $ 72 $ 113 $ 51 $ 15 $ 21 Trade receivables, less allowances (1995: $42; 1994; $38) 1,219 1,001 1,219 1,001 - - Financing receivables and leases, less allowances (1995: $11; 1994: $15) 948 866 - - 948 866 Inventories 1,131 838 1,131 838 - - Other current assets 306 301 307 287 7 14 ------ ------ ------ ------ ------ ------ TOTAL CURRENT ASSETS 3,732 3,078 2,770 2,177 970 901 Investments and other assets 765 690 1,029 943 - - Financing receivables and leases, less allowances (1995: $25; 1994: $31) 717 717 - - 717 717 Intangibles, net 930 730 930 730 - - ------ ------ ------ ------ ------ ------ 2,412 2,137 1,959 1,673 717 717 Property, plant and equipment 3,361 3,101 3,333 3,075 28 26 Accumulated depreciation (1,803) (1,661) (1,785) (1,645) (18) (16) ------ ------ ------ ------ ------ ------ 1,558 1,440 1,548 1,430 10 10 ------ ------ ------ ------ ------ ------ TOTAL ASSETS $7,702 $6,655 $6,277 $5,280 $1,697 $1,628 ====== ====== ====== ====== ====== ======
See notes to consolidated condensed financial statements 5
CONSOLIDATED CONDENSED BALANCE SHEETS File: 8SQ1695.XLS WHIRLPOOL CORPORATION AND SUBSIDIARIES JLA 7/31/95 (millions of dollars) Supplemental Consolidating Data -------------------------------------------------- Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) ------------------------ ------------------------ ------------------------ June 30 December 31 June 30 December 31 June 30 December 31 1995 1994 1995 1994 1995 1994 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) ----------- ----------- ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $1,977 $1,201 $ 939 $ 262 $1,038 $ 939 Accounts payable 871 843 826 795 53 48 Other current liabilities 840 944 838 924 2 20 ------ ------ ------ ------ ------ ------ TOTAL CURRENT LIABILITIES 3,688 2,988 2,603 1,981 1,093 1,007 Long-term debt 1,016 885 864 703 152 182 Other liabilities 971 964 858 853 113 111 ------ ------ ------ ------ ------ ------ 1,987 1,849 1,722 1,556 265 293 Minority interests 166 95 91 20 75 75 STOCKHOLDERS' EQUITY Common Stock 80 80 80 80 8 8 Paid-in capital 220 214 220 214 26 26 Retained earnings 1,831 1,754 1,831 1,754 228 220 Unearned restricted stock (7) (8) (7) (8) - - Currency translation adjustments (28) (93) (28) (93) 2 (1) Treasury stock - at cost (235) (224) (235) (224) - - ------ ------ ------ ------ ------ ------ TOTAL STOCKHOLDERS' EQUITY 1,861 1,723 1,861 1,723 264 253 ------ ------ ------ ------ ------ ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,702 $6,655 $6,277 $5,280 $1,697 $1,628 ====== ====== ====== ====== ====== ======
See notes to consolidated condensed financial statements 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) WHIRLPOOL CORPORATION AND SUBSIDIARIES SIX MONTHS ENDED JUNE 30 (millions of dollars) Supplemental Consolidating Data --------------------------------------------- Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) --------------------- --------------------- --------------------- 1995 1994 1995 1994 1995 1994 --------- --------- --------- --------- --------- --------- OPERATING ACTIVITIES Net earnings $ 127 $ 151 $ 127 $ 151 $ 8 $ 7 Equity in net earnings of affiliated companies, less dividends received (27) (13) (27) (13) - - Equity in net earnings of WFC - - (8) (7) - - Gain on disposition - (34) - (34) - - Depreciation and amortization 164 150 150 135 14 15 Provision for doubtful accounts 19 15 4 5 15 10 Restructuring spending (35) - (35) - - - Change in receivables (141) (228) (141) (228) - - Change in inventories (225) (165) (225) (165) - - Change in payables (15) 21 (13) 26 (2) (5) Other operating activities (79) 21 (68) 35 (11) (14) -------- -------- -------- -------- -------- -------- CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (212) (82) (236) (95) 24 13 INVESTING ACTIVITIES Net additions to properties (172) (132) (170) (131) (2) (1) Financing receivables originated (1,655) (1,381) - - (1,655) (1,381) Principal payments received on financing receivables and leases 1,576 1,500 - - 1,576 1,500 (Acquisition)/Disposition of businesses, less cash acquired (98) 80 (98) 80 - - Other investing activities (16) (4) - (4) (16) - -------- -------- -------- -------- -------- -------- CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (365) 63 (268) (55) (97) 118 FINANCING ACTIVITIES Proceeds of short-term borrowings 7,594 6,160 3,264 2,238 4,330 3,922 Repayments of short-term borrowings (6,874) (6,015) (2,653) (2,001) (4,221) (4,014) Proceeds of long-term debt 75 6 106 27 - - Repayments of long-term debt (61) (117) (59) (117) (33) (21) Repayments of non-recourse debt (9) (9) - - (9) (9) Dividends paid (50) (45) (50) (45) - - Purchase of treasury stock (35) - (35) - - - Other financing activities (7) 11 (7) 11 - - -------- -------- -------- -------- -------- -------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 633 (9) 566 113 67 (122) -------- -------- -------- -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS 56 (28) 62 (37) (6) 9 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 72 88 51 81 21 7 -------- -------- -------- -------- -------- -------- CASH AND EQUIVALENTS AT END OF PERIOD $ 128 $ 60 $ 113 $ 44 $ 15 $ 16 ======== ======== ======== ======== ======== ========
See notes to consolidated condensed financial statements 7 WHIRLPOOL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE A--BASIS OF PRESENTATION AND SUMMARY OF PRINCIPAL ACCOUNTING POLICIES The accompanying unaudited consolidated condensed financial statements present information in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X. Accordingly, they do not include all information or footnotes required by generally accepted accounting principles for complete financial statements. Management believes the financial statements include all normal recurring accrual adjustments necessary for a fair presentation. Operating results for the six months ended June 30, 1995 do not necessarily indicate the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report for the year ended December 31, 1994. WFC adopted Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan," effective January 1, 1995. The new rules require WFC to measure impaired loans based on the present value of expected future cash flows discounted at the loan's effective interest rate. Adoption of the new rules had no material effect on the Company's net earnings or financial position. NOTE B--BUSINESS ACQUISITIONS AND DISPOSITIONS The Company had previously announced plans to begin manufacturing and distributing major home appliances in China. In May 1995, the Company acquired a controlling interest in Shunde SMC Microwave Products Co., Ltd., a microwave oven manufacturer, for about $90 million in cash. Consolidation of SMC operating results will begin in the third quarter. SMC annual sales were about $100 million for its fiscal year 1994. The Company has also entered into two agreements to invest about $17 million for the majority interest in Beijing Whirlpool Snowflake Electric Appliance Company, Limited to produce refrigerators and about $16 million for the majority interest in Shanghai Narcissus Electric Appliance Corp., Ltd. to produce washing machines. These two new joint ventures will be funded over the course of the year. The Company is currently negotiating a fourth joint venture to produce air conditioners. In February 1995, the Company also expanded its presence in Asia by acquiring a controlling interest in Kelvinator of India, Ltd. (KOI), a manufacturer and marketer of refrigerators, for about $116 million in cash funded principally in the first quarter. As the transaction involved an issue of new KOI shares, most of the purchase price was invested as equity in KOI in support of planned plant and product line expansion. Consolidation of KOI operating results began in the second quarter. KOI annual sales were about $120 million for its fiscal year 1994. 8 WHIRLPOOL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) These acquisitions did not have a significant impact on the consolidated operating results for the second quarter or year-to-date. The consolidated balance sheet at June 1995 reflects preliminary allocations of the purchase price for each of the acquisitions. NOTE C--INVENTORIES Inventories consist of the following:
June 30 December 31 1995 1994 ------- ----------- (millions of dollars) Finished products $1,121 $ 832 Raw materials and work in process 234 222 ------ ------ Total FIFO cost 1,355 1,054 Less excess of FIFO cost over LIFO cost 224 216 ------ ------ $1,131 $ 838 ====== ======
NOTE D--AFFILIATED COMPANIES Equity in the net earnings of affiliated companies is as follows:
Six Months Ended June 30 1995 1994 -------------------- (million of dollars) Brazilian affiliates $37 $11 Mexican affiliate (4) 2 Other 1 2 --- --- $34 $15 === ===
9 WHIRLPOOL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE E--GEOGRAPHIC SEGMENTS
Whirlpool Three Months North Other and with WFC on Ended June 30 America Europe Eliminations an Equity Basis - ------------------------------------------------------------------------------- (millions of dollars) Revenues 1995 $1,330 $ 608 $131 $2,069 1994 $1,330 $ 584 $ 99 $2,013 Operating Profit 1995 $ 65 $ 33 $(11) $ 87 1994 $ 76 $ 86 $ 5 $ 167 Whirlpool Six Months North Other and with WFC on Ended June 30 America Europe Eliminations an Equity Basis - ------------------------------------------------------------------------------- (millions of dollars) Revenues 1995 $2,525 $1,241 $242 $4,008 1994 $2,503 $1,146 $196 $3,845 Operating Profit 1995 $ 148 $ 77 $(15) $ 210 1994 $ 167 $ 117 $ 15 $ 299
WFC operations are primarily in North America. The second quarter sale of the European compressor operation in 1994 resulted in a $54 million gain in Europe and a $20 million loss in North America for a net consolidated gain of $34 million. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The statements of earnings summarize operating results for the three and six months ended June 30, 1995 and 1994. This section of Management's Discussion highlights the main factors affecting the changes in operating results. The accompanying financial statements include supplemental consolidating data reflecting the Company's investment in Whirlpool Financial Corporation ("WFC") on an equity basis rather than as a consolidated subsidiary. Management believes this presentation provides more meaningful information about the major home appliance and financial services businesses. Revenues - -------- Revenues increased 3% for the second quarter and 4% for the first half compared to the prior year periods. Excluding the effects of currency fluctuations, revenues decreased 1% for the second quarter and were flat for the first half with slight increases in volume and pricing offset by product mix. North American revenues and product shipments were essentially flat in both the second quarter and first half while the overall industry was down slightly in both periods. North American industry-wide shipments are currently expected to be down about 2-3% for the full year. European revenues increased 4% for the second quarter and 9% for the first half. Excluding the effects of currency fluctuations, revenues were down 10% for the second quarter and 5% for the first half primarily due to product mix. European unit volumes were down 3% in the second quarter and were up slightly in the first half while the industry was flat for the quarter and up slightly for the first half. European industry-wide shipments are currently expected to be flat to down about 1% for the full year. Price increases of approximately 1 to 3% were implemented in North America and Europe effective January 1, 1995 in response to rising raw material and component prices, but have not been fully realized. Financial services revenues increased 26% for the second quarter and 22% for the first half as WFC continued to expand its core inventory and consumer finance businesses. Expenses - -------- The relationship of cost of products sold to net sales deteriorated for both the second quarter and six month period compared to 1994. North American margins were down for both periods due to the start-up costs associated with the production of redesigned midsize refrigerators, the difficult economic situation in Mexico and higher raw material and component costs partially offset by price increases. European margins were up for both the second quarter and the first half of 1995 due to productivity improvements, continued expense control, benefits from restructuring, price increases and currency translation partially offset by higher raw material and component costs. The ratio of consolidated selling and administrative expenses as a percent of revenues increased slightly for both the second quarter and six month period. The appliance business expense ratio for the second quarter increased from 17.6% in 1994 to 18.6% in 1995 similar to the increase in the first half due primarily to a planned increase in costs related to the Company's strategy to expand its presence in Asia. North American expenses as a percent of revenue were flat as compared to the prior periods. European expenses as a percent of revenue were up for both the quarter and six months as compared to the prior period primarily due to decreased sales excluding the effect of currency exchange. Financial services expenses as a percent of the related revenue were flat for the 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION first half and down slightly for the quarter as WFC successfully transitioned to its strategy of supporting the inventory and consumer finance business. The Company sold its European compressor operation in 1994 resulting in a $34 million gain (refer to Cash Flow - Investing Activities). Other Income and Expense - ------------------------ The decrease in other income (expense) for the first half compared to the prior year period is due primarily to foreign currency losses. However, the overall impact of currency fluctuations in the first half was not significant due to offsetting foreign currency gains reported elsewhere in the statement of earnings. The increase in interest expense compared to the prior periods is due primarily to higher borrowing levels to fund acquisitions and restructuring spending. Income Taxes - ------------ The consolidated provision for income taxes as a percent of earnings before income taxes and other items was 41% in the first half of 1995 compared to 47% in 1994 and 42% in the second quarter 1995 compared to 52% in 1994. The higher effective tax rate in 1994 is due primarily to a 1994 tax charge associated with the sale of the European compressor operation. Excluding the effects of this business disposition, the effective tax rate was up slightly from the prior year. Equity in Affiliated Companies - ------------------------------ Equity earnings in affiliated companies were $16 million in the second quarter of 1995 compared to $12 million in 1994 and $34 million in the first half of 1995 compared to $15 million in the prior year period. Refer to Note D to the consolidated condensed financial statements. The Company's Brazilian affiliates generated equity earnings of $20 million in the second quarter and $37 million in the first half of 1995 compared to $8 million and $11 million in 1994 reflecting primarily the increased consumer demand stimulated by the Brazilian government's economic plan implemented in mid-1994. Results were also favorably affected by certain tax credit benefits, most of which have been realized in the first half, and the consequences of the May 1994 merger of two of the Brazilian affiliates, Brastemp S.A. and Consul S.A., into a new entity, Multibras S.A. The merger resulted in operating efficiencies as an outcome of consolidating selling and administrative functions, improved utilization of prior year tax losses and more flexibility in management of brands and products. Brazilian equity earnings in the second half of 1995 are not expected to reach first half levels due to anticipated moderation of economic growth and decreased tax credit benefits. The Company's Mexican affiliate generated losses of $4 million for the second quarter of 1995 compared to $2 million of earnings for the same period in 1994. Reduced shipments and higher financing costs resulting from difficult economic conditions in Mexico were partially offset by cost reductions and net translation gains from the Peso devaluation. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Economic volatility and government economic policy changes (including those affecting exchange rates and tariffs) continue to affect consumer purchasing power and the appliance industry as a whole in Mexico, Brazil and the entire Latin American region. The outlook in these regions remains uncertain. Net Earnings - ------------ Second quarter net earnings were $52 million or $.70 per share compared to net earnings of $84 million or $1.10 per share in 1994. First half net earnings were $127 million or $1.70 per share compared to net earnings of $151 million or $2.00 per share in 1994. CASH FLOWS The statements of cash flows reflect the changes in cash and equivalents for the six months ended June 30, 1995 and 1994 by classifying transactions into three major categories: operating, investing and financing activities. Operating Activities - -------------------- The Company's main source of liquidity is cash from operating activities consisting of net earnings from operations adjusted for non-cash operating items such as depreciation and changes in operating assets and liabilities such as receivables, inventories and payables. Cash used for operating activities in the first half was $212 million in 1995 compared to $82 million in 1994 largely reflecting seasonal working capital needs of the appliance business. The change from the prior year is due primarily to 1995 restructuring spending and changes in other operating accounts including decreased accrued expenses and higher income tax and payroll related payments. Investing Activities - -------------------- The principal recurring investing activities are property additions and investments in and collection of financing receivables and leases. Net property additions in the first half were $172 million in 1995 compared to $132 million in 1994. These expenditures are primarily for equipment and tooling related to product improvements, more efficient production methods, replacement for normal wear and tear and more stringent governmental energy and environmental regulations. Investment in the financial services business resulted in a net $79 million use of cash in 1995 compared to a net $119 million source of cash in 1994 reflecting the expansion of WFC's inventory and consumer finance businesses, as well as the 1994 liquidation of WFC's discontinued commercial loan portfolio. The Company had previously announced plans to begin manufacturing and distributing major home appliances in China. In May 1995, the Company acquired a controlling interest in Shunde SMC Microwave Products Co., Ltd., a microwave oven manufacturer, for about $90 million in cash. Consolidation of SMC operating results will begin in the third quarter. SMC annual sales were about $100 million for its fiscal year 1994. The Company has also entered into two agreements to 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION invest about $17 million for the majority interest in Beijing Whirlpool Snowflake Electric Appliance Company, Limited, to produce refrigerators, and about $16 million for the majority interest in Shanghai Narcissus Electric Appliance Corp., Ltd., to produce washing machines. These two new joint ventures will be funded over the course of the year. The Company is currently negotiating a fourth joint venture to produce air conditioners. In February 1995, the Company also expanded its presence in Asia by acquiring a controlling interest in Kelvinator of India, Ltd. (KOI), a manufacturer and marketer of refrigerators, for about $116 million in cash funded principally in the first quarter. As the transaction involved an issue of new KOI shares, most of the purchase price was invested as equity in KOI in support of planned plant and product line expansion. Consolidation of KOI operating results began in the second quarter. KOI annual sales were about $120 million for its fiscal year 1994. In April 1994, the Company sold its European compressor operation to one of the Company's Brazilian affiliates for $106 million. The Company received seventy- five percent of the selling price in cash at the closing date and the remainder in June 1995. The sale resulted in a pre-tax gain of $34 million in 1994 but no significant gain or loss after taxes. Financing Activities - -------------------- In December 1994, the Company announced plans to repurchase up to five percent of its outstanding shares of common stock. The treasury shares will be used in employee stock-option, retirement and other compensation programs and for general corporate purposes. Through the end of June 1995, the Company had repurchased approximately 966,000 shares for $50 million. FINANCIAL CONDITION AND OTHER MATTERS The financial position of the Company remains strong as evidenced by the June 30, 1995 balance sheet. The Company's total assets are $7.7 billion and stockholders' equity is $1.9 billion. The overall debt to invested capital ratio at June 30, 1995 was up compared to December 31, 1994. The appliance business debt to invested capital ratio net of cash ("debt ratio") increased from 34% to 46% due primarily to seasonal working capital requirements, the Asian acquisitions and the effect of European currency movements on the Company's hedging strategy. The financial services debt to invested capital ratio was essentially flat compared to December 31, 1994. The Company's debt continues to be rated investment grade by Moody's Investors Service Inc., Standard and Poors and Duff & Phelps. Various European currency swaps and forward contracts serve as a hedge of net European currency cash flows and a portion of the Company's net assets in Europe. Changes in the value of the swaps and forward contracts due to movements in exchange rates are included in the currency translation component of stockholders' equity or other income (expense) depending on whether or not they relate to the European net asset hedge. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION WFC's financing portfolio by business segment is as follows (in millions):
June 30, 1995 December 31, 1994 ------------- ------------ Inventory $ 760 46% $ 652 41% Aerospace 427 26 465 29 Consumer 418 25 386 24 Commercial 16 1 25 2 Other 44 2 55 4 ------------ ------------ $1,665 100% $1,583 100% ============ ============
The aerospace portfolio is generally secured by newer (Stage III) aircraft on lease to various international airlines. Although the commercial airline industry seems to be stabilizing, the near-term outlook remains uncertain. Management believes the aerospace portfolio carrying value is appropriate. The Company is continuing to phase out of aerospace and highly leveraged commercial lending activities. WFC adopted Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan," effective January 1, 1995. The new rules require WFC to measure impaired loans based on the present value of expected future cash flows discounted at the loan's effective interest rate. Adoption of the new rules had no material effect on the Company's net earnings or financial position. The Company has external sources of capital available and believes it has adequate financial resources and liquidity to meet anticipated business needs and to fund future growth opportunities such as new products, acquisitions and joint ventures. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION BUSINESS UNIT NET SALES AND OPERATING PROFIT The following appliance business (WFC on an equity basis) data is presented as supplemental information (in millions): Sales by Business Unit were as follows:
Second Quarter Better/(Worse) First Half Better/(Worse) ---------------- -------------- ---------------- -------------- 1995 1994 $ % 1995 1994 $ % ------ ------ ---- --- ------ ------ ---- --- North America $1,329 $1,330 $ (1) - % $2,525 $2,503 $ 22 1 % Europe 586 561 25 4 1,201 1,102 99 9 Latin America 61 74 (13) (18) 128 149 (21) (14) Asia 94 51 43 84 156 96 60 63 Other (1) (3) 2 67 (2) (5) 3 60 ------ ------ ---- --- ------ ------ ---- --- Total Appliance Business $2,069 $2,013 $ 56 3 % $4,008 $3,845 $163 4 % ====== ====== ==== === ====== ====== ==== ===
Operating Profit by Business Unit was as follows:
Second Quarter Better/(Worse) First Half Better/(Worse) ---------------- -------------- ---------------- -------------- 1995 1994 $ % 1995 1994 $ % ------ ------ ---- --- ------ ------ ---- --- North America $ 93 $ 133 $(40) (30)% $ 209 $ 252 $(43) (17)% Europe 34 32 2 6 78 63 15 24 Latin America 5 12 (7) (58) 14 24 (10) (42) Asia (12) (3) (9) N/M (23) (6) (17) N/M Restructuring - (4) 4 N/M - (4) 4 N/M Business Disposition - 34 (34) N/M - 34 (34) N/M Other (33) (37) 4 11 (68) (64) (4) (6) ------ ------ ---- --- ------ ------ ---- --- Total Appliance Business $ 87 $ 167 $(80) (48)% $ 210 $ 299 $(89) (30)% ====== ====== ==== === ====== ====== ==== ===
For commentary regarding performance in North America and Europe, refer to Results of Operations. Latin America includes Whirlpool Argentina and the South American Sales Company (SASCO). Whirlpool Argentina results were adversely affected by a sharp decline in appliance industry volumes, driven primarily by a faltering economy and very tight credit. SASCO results were up, despite being affected by pockets of economic instability. Asia had significant shipment and revenue growth as compared to the prior year period but the increased operating loss was due primarily to planned costs related to the Company's strategy to expand its presence in Asia. 16 PART II. OTHER INFORMATION --------------------------- WHIRLPOOL CORPORATION AND SUBSIDIARIES -------------------------------------- Quarter Ended June 30, 1995 Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ a. The Annual Meeting of Stockholders was held on April 18, 1995 with the following directors each elected to a term to expire in 1998 pursuant to a stockholder vote.
Broker Nominee For Against Abstentions Nonvotes - ------- --- ------- ----------- -------- Robert A. Burnett 64,946,424 0 243,911 0 Herman Cain 64,937,286 0 253,059 0 Allan D. Gilmour 64,956,728 0 233,607 0 Janice D. Stoney 64,943,696 0 246,639 0 David R. Whitwam 64,884,066 0 306,269 0
Messrs. Bonomo, Langbo, Marohn, Marsh, Smith and Stern and Ms. Hempel each have terms of office as directors which continued after the 1995 Annual Meeting. Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- No Reports on Form 8-K were filed for the quarterly period ended June 30, 1995. 17 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WHIRLPOOL CORPORATION (Registrant) Bradley J. Bell By_____________________________ Bradley J. Bell Vice President and Treasurer (Principal Financial Officer) August 11, 1995 21 EX-11 2 COMPUTATION OF EARNINGS EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE WHIRLPOOL CORPORATION AND SUBSIDIARIES (millions of dollars except earnings per share)
Six Months Ended June 30 ------------------ 1995 1994 ------ ------ Primary Average Shares Outstanding 73.8 74.0 Treasury Method (Average Market Price) Stock Options 0.7 1.2 Restricted Stock (RSVP) 0.3 0.3 ------ ------ Primary Average Shares Outstanding 74.8 75.5 ====== ====== Net Earnings $127.3 $150.7 RSVP Amortization, net of tax - 0.1 ------ ------ Primary Net Earnings $127.3 $150.8 ====== ====== Earnings Per Share $ 1.70 $ 2.00 ====== ====== Fully Diluted Average Shares Outstanding 73.8 74.0 Treasury Method (Average Market Price or End of Period, whichever is greater): Stock Options 0.9 1.4 Restricted Stock (RSVP) 0.3 0.3 Assumed Conversion of Debt 2.2 2.2 ------ ------ Fully Diluted Average Shares Outstanding 77.2 77.9 ====== ====== Net Earnings $127.3 $150.7 Interest Expense, net of tax 2.1 2.3 RSVP Amortization, net of tax - 0.1 ------ ------ Fully Diluted Net Earnings $129.4 $153.1 ====== ====== Earnings Per Share $ 1.68 $ 1.97 ====== ======
18 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECOND QUARTER 10-Q FOR WHIRLPOOL CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 128 0 2,167 53 1,131 3,732 3,361 1,803 7,702 3,688 1,016 80 0 0 1,781 7,702 4,008 4,100 3,028 3,061 14 0 63 162 66 127 0 0 0 127 1.70 1.68
EX-99 4 COMPUTATION OF RATIOS EXHIBIT 99 - COMPUTATION OF THE RATIOS OF EARNINGS TO FIXED CHARGES WHIRLPOOL CORPORATION AND SUBSIDIARIES (dollars in millions)
Six Months Ended June 30, 1995 ------------------------------------- Appliance Financial Whirlpool Business Services Corporation --------- --------- ----------- Pretax earnings $ 145.3 $ 16.6 $ 161.9 Portion of rents representative of the interest factor 10.0 0.4 10.4 Interest on indebtedness 57.7 38.0 95.7 Amortization of debt expense and premium 0.3 0.1 0.4 WFC preferred stock dividend - 2.3 2.3 --------- --------- ----------- Adjusted income $ 213.3 $ 57.4 $ 270.7 ========= ========= =========== Fixed charges - ------------- Portion of rents representative of the interest factor $ 10.0 $ 0.4 $ 10.4 Interest on indebtedness 57.7 38.0 95.7 Amortization of debt expense and premium 0.3 0.1 0.4 WFC preferred stock dividend - 2.3 2.3 --------- --------- ----------- $ 68.0 $ 40.8 $ 108.8 ========= ========= =========== Ratio of earnings to fixed charges 3.14 1.41 2.49 ========= ========= =========== Ratio of earnings to fixed charges at June 30, 1994 5.44 1.44 4.08 ========= ========= ===========
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