-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qs7Pflq8i3NmAdW9lgfgYesv4iIB1wK40/6nfMuv4L1i6FU4wSf4bkdZecRyKBTD SdeLVRQuo54/xSq1YVzcNA== 0000950131-95-003061.txt : 19951107 0000950131-95-003061.hdr.sgml : 19951107 ACCESSION NUMBER: 0000950131-95-003061 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951106 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: 95587595 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 September 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 September 30, 1995 --------------------- ---------------------------------------- Common stock, par value $1 per share 74,006,699 PAGE 1 OF 23 QUARTERLY REPORT ON FORM 10-Q ----------------------------- WHIRLPOOL CORPORATION --------------------- Quarter Ended September 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 12 PART II - OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 19 2
PART I. FINANCIAL INFORMATION CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q3Q WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 10/26/95 THREE MONTHS ENDED September 30 Supplemental Consolidating Data (millions of dollars except share data) ------------------------------------------------------ Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) -------------------------- -------------------------- -------------------------- 1995 1994 1995 1994 1995 1994 ------------ ------------ ------------ ------------ ------------ ------------ REVENUES Net sales $2,109 $2,046 $2,109 $2,046 $- $- Financial services 45 39 - - 55 46 ------ ------ ------ ------ --- --- 2,154 2,085 2,109 2,046 55 46 EXPENSES Cost of products sold 1,626 1,538 1,626 1,538 - - Selling and administrative 380 374 358 352 32 29 Financial services interest 16 12 - - 20 15 Intangible amortization 8 7 8 7 - - Gain on disposition - (26) - (26) - - Restructuring costs - 5 - 5 - - ------ ------ ------ ------ --- --- 2,030 1,910 1,992 1,876 52 44 ------ ------ ------ ------ --- --- OPERATING PROFIT 124 175 117 170 3 2 OTHER INCOME (EXPENSE) Interest and sundry (2) (1) (4) (4) 2 3 Interest expense (41) (29) (37) (26) - - ------ ------ ------ ------ --- --- EARNINGS BEFORE TAXES AND OTHER ITEMS 81 145 76 140 5 5 Income taxes 30 57 29 55 1 2 ------ ------ ------ ------ --- --- EARNINGS BEFORE EQUITY EARNINGS AND OTHER ITEMS 51 88 47 85 4 3 Equity in WFC - - 2 2 - - Equity in affiliated companies 15 13 15 13 - - Minority interests (2) (3) - (2) (2) (1) ------ ------ ------ ------ --- --- NET EARNINGS $ 64 $ 98 $ 64 $ 98 $ 2 $ 2 ====== ====== ====== ====== === === Per share of Common Stock: Primary earnings $ 0.85 $ 1.30 ====== ====== Fully diluted earnings $ 0.83 $ 1.27 ====== ====== Cash dividends $0.340 $0.305 ====== ======
See notes to consolidated condensed financial statements 3
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED) File: IS10Q3Y WHIRLPOOL CORPORATION AND SUBSIDIARIES DLR 10/26/95 NINE MONTHS ENDED September 30 Supplemental Consolidating Data (millions of dollars except share data) ------------------------------------------------------ Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) ------------ ------------ ------------ ------------ ------------ ------------ 1995 1994 1995 1994 1995 1994 ------------ ------------ ------------ ------------ ------------ ------------ REVENUES Net sales $6,117 $5,891 $6,117 $5,891 $ - $ - Financial services 137 114 - - 163 135 ------ ------ ------ ------ ---- ---- 6,254 6,005 6,117 5,891 163 135 EXPENSES Cost of products sold 4,654 4,418 4,654 4,418 - - Selling and administrative 1,180 1,094 1,114 1,037 92 78 Financial services interest 49 37 - - 58 45 Intangible amortization 22 18 22 18 - - Gain on dispositions - (60) - (60) - - Restructuring costs - 9 - 9 - - ------ ------ ------ ------ ---- ---- 5,905 5,516 5,790 5,422 150 123 ------ ------ ------ ------ ---- ---- OPERATING PROFIT 349 489 327 469 13 12 OTHER INCOME (EXPENSE) Interest and sundry (2) 8 (10) 2 8 6 Interest expense (104) (82) (95) (74) - - ------ ------ ------ ------ ---- ---- EARNINGS BEFORE TAXES AND OTHER ITEMS 243 415 222 397 21 18 Income taxes 96 184 89 178 7 6 ------ ------ ------ ------ ---- ---- EARNINGS BEFORE EQUITY EARNINGS AND OTHER ITEMS 147 231 133 219 14 12 Equity in WFC - - 10 9 - - Equity in affiliated companies 49 28 49 28 - - Minority interests (5) (10) (1) (7) (4) (3) ------ ------ ------ ------ ---- ---- NET EARNINGS $ 191 $ 249 $ 191 $ 249 $ 10 $ 9 ====== ====== ====== ====== ==== ==== Per share of Common Stock: Primary earnings $ 2.55 $ 3.30 ====== ====== Fully diluted earnings $ 2.51 $ 3.24 ====== ====== Cash dividends $1.020 $0.915 ====== ====== See notes to consolidated condensed financial statements
4
File: BSQ1995.XLS CONSOLIDATED CONDENSED BALANCE SHEETS JLA 10/26/95 WHIRLPOOL CORPORATION AND SUBSIDIARIES (millions of dollars) Supplemental Consolidating Data --------------------------------------------------------- Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) ---------------------------- --------------------------- --------------------------- September 30 December 31 September 30 December 31 September 30 December 31 1995 1994 1995 1994 1995 1994 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) ------------- ------------- ------------ ------------- ------------ ------------- ASSETS CURRENT ASSETS Cash and equivalents $ 144 $ 72 $ 114 $ 51 $ 30 $ 21 Trade receivables, less allowances (1995: $44 ;1994: $38) 1,122 1,001 1,122 1,001 - - Financing receivables and leases, less allowances (1995: $12 ;1994: $15) 1,008 866 - - 1,008 866 Inventories 995 838 995 838 - - Other current assets 282 301 281 287 9 14 ------- ------- ------- ------- ------ ------- TOTAL CURRENT ASSETS 3,551 3,078 2,512 2,177 1,047 901 Investments and other assets 803 690 1,069 943 - - Financing receivables and leases, less allowances (1995: $26 ;1994: $31) 743 717 - - 743 717 Intangibles, net 931 730 931 730 - - ------- ------- ------- ------- ------ ------- 2,477 2,137 2,000 1,673 743 717 Property, plant and equipment 3,447 3,101 3,417 3,075 29 26 Accumulated depreciation (1,861) (1,661) (1,842) (1,645) (19) (16) ------- ------- ------- ------- ------ ------- 1,586 1,440 1,575 1,430 10 10 ------- ------- ------- ------- ------ ------- TOTAL ASSETS $ 7,614 $ 6,655 $ 6,087 $ 5,280 $1,800 $1,628 ======= ======= ======= ======= ====== =======
See notes to consolidated condensed financial statements 5
File: BSQ1995.XLS CONSOLIDATED CONDENSED BALANCE SHEETS JLA 10/26/95 WHIRLPOOL CORPORATION AND SUBSIDIARIES (millions of dollars) Supplemental Consolidating Data --------------------------------------------------------- Whirlpool Corporation Whirlpool with WFC Whirlpool Financial (Consolidated) on an Equity Basis Corporation (WFC) ---------------------------- --------------------------- --------------------------- September 30 December 31 September 30 December 31 September 30 December 31 1995 1994 1995 1994 1995 1994 (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) ------------- ------------- ------------ ------------- ------------ ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 1,923 $ 1,201 $ 805 $ 262 $1,118 $ 939 Accounts payable 846 843 762 795 91 48 Other current liabilities 839 944 835 924 3 20 ------- ------- ------- ------- ------ ------- TOTAL CURRENT LIABILITIES 3,608 2,988 2,402 1,981 1,212 1,007 Long-term debt 978 885 845 703 133 182 Other liabilities 983 964 870 853 114 111 ------- ------- ------- ------- ------ ------- 1,961 1,849 1,715 1,556 247 293 Minority interests 140 95 65 20 75 75 STOCKHOLDERS' EQUITY Common stock 81 80 81 80 8 8 Paid-in capital 225 214 225 214 26 26 Retained earnings 1,870 1,754 1,870 1,754 230 220 Unearned restricted stock (7) (8) (7) (8) - - Currency translation adjustments (29) (93) (29) (93) 2 (1) Treasury stock - at cost (235) (224) (235) (224) - - ------- ------- ------- ------- ------ ------- TOTAL STOCKHOLDERS' EQUITY 1,905 1,723 1,905 1,723 266 253 ------- ------- ------- ------- ------ ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,614 $ 6,655 $ 6,087 $ 5,280 $1,800 $1,628 ======= ======= ======= ======= ====== =======
See notes to consolidated condensed financial statements 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) WHIRLPOOL CORPORATION AND SUBSIDIARIES NINE MONTHS ENDED SEPTEMBER 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 $ 191 $ 249 $ 191 $ 249 $ 10 $ 9 Equity in net earnings of affiliated companies, less dividends received (31) (26) (31) (26) - - Equity in net earnings of WFC - - (10) (9) - - Gain on dispositions - (60) - (60) - - Depreciation and amortization 249 224 227 202 22 22 Provision for doubtful accounts 31 23 7 6 24 17 Restructuring spending (65) - (65) - - - Change in receivables (70) (149) (70) (149) - - Change in inventories (86) (135) (86) (135) - - Change in payables (25) 7 (61) 7 36 - Other operating activities (68) 18 (61) 24 (7) (6) --------- -------- -------- -------- -------- -------- CASH PROVIDED BY OPERATING ACTIVITIES 126 151 41 109 85 42 INVESTING ACTIVITIES Net additions to properties (263) (223) (259) (221) (4) (2) Financing receivables originated and leasing assets purchased (2,584) (2,156) - - (2,584) (2,156) Principal payments received on financing receivables and leases 2,410 2,249 - - 2,410 2,249 (Acquisition)/disposition of businesses, less cash acquired (125) 80 (125) 80 - - Other investing activities (23) (20) - (7) (23) (13) --------- -------- -------- -------- -------- -------- CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (585) (70) (384) (148) (201) 78 FINANCING ACTIVITIES Proceeds of short-term borrowings 11,668 9,610 4,839 3,132 6,829 6,478 Repayments of short-term borrowings (11,020) (9,429) (4,370) (2,946) (6,650) (6,483) Proceeds of long-term debt 70 20 111 104 - - Repayments of long-term debt (63) (202) (60) (199) (44) (87) Repayments of non-recourse debt (10) (10) - - (10) (10) Dividends paid (75) (68) (75) (68) - - Purchase of treasury stock (35) - (35) - - - Other financing activities (4) 11 (4) 11 - - --------- -------- -------- -------- -------- -------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 531 (68) 406 34 125 (102) --------- -------- -------- -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS 72 13 63 (5) 9 18 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 72 88 51 81 21 7 --------- -------- -------- -------- -------- -------- CASH AND EQUIVALENTS AT END OF PERIOD $ 144 $ 101 $ 114 $ 76 $ 30 $ 25 ========= ======== ======== ======== ======== ========
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 nine months ended September 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. Whirlpool Financial Corporation ("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 did not have a 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 September 1995, the Company entered into an agreement to acquire controlling interest in a Chinese joint venture that will build and market air conditioners under the Whirlpool and Raybo brand names for an initial capital contribution of $22 million. This acquisition is expected to close in the fourth quarter of 1995. 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 began 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 this year. 8 WHIRLPOOL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 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. These acquisitions did not have a significant impact on the consolidated operating results for the third quarter or year-to-date. The consolidated balance sheet at September 1995 reflects preliminary allocations of the purchase price for each of the completed acquisitions. 9 WHIRLPOOL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE C--INVENTORIES Inventories consist of the following: September 30 December 31 1995 1994 ------------ ----------- (millions of dollars) Finished products $ 973 $ 832 Raw materials and work in process 252 222 ------ ------ Total FIFO cost 1,225 1,054 Less excess of FIFO cost over LIFO cost 230 216 ------ ------ $ 995 $ 838 ====== ====== NOTE D--AFFILIATED COMPANIES Equity in the net earnings of affiliated companies is as follows: Nine Months Ended September 30 1995 1994 ------------ ----------- (millions of dollars) Brazilian affiliates $52 $24 Mexican affiliate (5) 4 Other 2 - --- --- $49 $28 === === 10 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 September 30 America Europe Eliminations an Equity Basis - ------------------------------------------------------------------------------ (millions of dollars) Revenues 1995 $1,335 $ 632 $142 $2,109 1994 $1,295 $ 635 $116 $2,046 Operating Profit 1995 $ 105 $ 22 $(10) $ 117 1994 $ 122 $ 43 $ 5 $ 170 Whirlpool Nine Months North Other and with WFC on Ended September 30 America Europe Eliminations an Equity Basis - ------------------------------------------------------------------------------ (millions of dollars) Revenues 1995 $3,860 $1,873 $384 $6,117 1994 $3,798 $1,781 $312 $5,891 Operating Profit 1995 $ 253 $ 99 $(25) $ 327 1994 $ 289 $ 160 $ 20 $ 469 WFC operations are primarily in North America. The third quarter sale of Matsushita Floor Care Company in 1994 resulted in a $26 million pre-tax gain in North America. The second quarter sale of the European compressor operation in 1994 resulted in a $54 million pre-tax gain in Europe and a $20 million pre-tax loss in North America for a net consolidated pre-tax gain of $34 million. 11 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 nine months ended September 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 third quarter and 4% for the first nine months compared to the prior year periods. Excluding the effects of currency fluctuations, revenues increased 1% for the third quarter and the first nine months due to increases in volume and pricing partially offset by unfavorable brand and product mix. North American sales were up 3% for the quarter and 2% for the first nine months primarily due to volume and selective price increases partially offset by product mix. North American unit volumes increased 2% for the third quarter and kept pace with the industry. European sales were essentially flat for the third quarter and up 6% for the first nine months. Excluding the effects of currency fluctuations, sales were down 6% for both the third quarter and first nine months primarily due to unfavorable brand and product mix. European unit volumes were down 1% in the third quarter and flat for the first nine months while the industry was up slightly for both the quarter and the first nine months. European industry-wide shipments are currently expected to be up slightly 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 17% for the third quarter and 20% for the first nine months as WFC continued to expand its core inventory and consumer finance businesses. Expenses - -------- The gross margin percentage deteriorated for both the third quarter and nine month period compared to 1994. North American margins were down for both periods due to higher raw material and component costs, start-up costs associated with the production of redesigned midsize refrigerators and the difficult economic situation in Mexico, partially offset by price increases. European margins were down for the third quarter and up slightly for the first nine months of 1995 due to higher raw material and component costs partially offset by productivity improvements, continued expense control, benefits from restructuring, price changes and currency translation. Appliance selling and administrative expenses as a percent of net sales decreased from 17.3% in the third quarter of 1994 to 17.0% in 1995 but increased from 17.6% in the first nine months of 1994 to 18.2% in 1995. North American expenses as a percent of net sales decreased compared to the prior periods due to cost reduction initiatives and lower compensation costs, the effects of which were more pronounced in the third quarter. After excluding the impact of translation, European expenses were down for the first nine months and flat for the quarter. However, European 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION expenses as a percent of net sales were up for both the quarter and nine months compared to the prior period primarily due to decreased sales after excluding the effect of currency translation. For the first nine months, appliance expense as a percent of net sales increased due to costs related to the Company's strategy to expand its presence in Asia and the increases in Europe partially offset by decreases in North America. However, for the third quarter, the North American decrease more than offset the Asian and European increases. WFC selling and administrative expenses as a percent of financial services revenue were down for both the quarter and the first nine months as WFC successfully transitioned to its strategy of supporting the inventory and consumer finance business. However, WFC's financial services interest as a percent of the related revenues was up for both the quarter and the first nine months compared to 1994 due to higher interest rates in 1995. In the third quarter of 1994, the Company sold its minority interest position in Matsushita Floor Care Company, a vacuum cleaner manufacturer, resulting in a $26 million gain (refer to Cash Flow - Investing Activities). 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 change in other income (expense) for the first nine months compared to the prior year period is due primarily to foreign currency losses. However, the overall impact of currency fluctuations in the first nine months 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 40% in the first nine months of 1995 compared to 44% in 1994 and 38% in the third quarter 1995 compared to 40% in 1994. The higher effective tax rate in the first nine months of 1994 is due primarily to a 1994 tax charge associated with the sale of the European compressor operation. The effective tax rate decreased in the third quarter and for the first nine months from the prior year excluding the effects of the dispositions in 1994 due primarily to favorable settlements of prior year tax returns. Equity in Affiliated Companies - ------------------------------ Equity earnings in affiliated companies were $15 million in the third quarter of 1995 compared to $13 million in 1994 and $49 million in the first nine months of 1995 compared to $28 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 $15 million in the third quarter and $52 million in the first nine months of 1995 compared to $13 million and $24 million in 1994 reflecting primarily the increased consumer demand stimulated by the Brazilian government's 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION economic plan implemented in mid-1994. Results were also favorably affected by certain tax credit benefits, which had been realized earlier in the year, 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 last quarter of 1995 are not expected to reach the level realized in the prior year or during the first half of 1995 due to anticipated moderation of economic growth and the tax credit benefits realized in the earlier periods. The Company's Mexican affiliate generated an equity loss of $1 million for the third quarter of 1995 compared to $2 million of earnings for the same period in 1994. For the first nine months the affiliate generated an equity loss of $5 million compared to $4 million of earnings for 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. 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 - ------------ Third quarter net earnings were $64 million or $.85 per share compared to net earnings of $98 million or $1.30 per share in 1994. First nine months net earnings were $191 million or $2.55 per share compared to net earnings of $249 million or $3.30 per share in 1994. CASH FLOWS The statements of cash flows reflect the changes in cash and equivalents for the nine months ended September 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 provided by operating activities in the first nine months was $126 million in 1995 compared to $151 million in 1994. The change from the prior year is due primarily to 1995 restructuring spending and lower earnings, partially offset by higher depreciation and amortization and the 1994 business dispositions. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 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 nine months were $263 million in 1995 compared to $223 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 $174 million use of cash in 1995 compared to a net $93 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. In September 1995, the Company executed another significant piece of its Asian strategy by entering into an agreement to acquire controlling interest in a Chinese joint venture that will build and market air conditioners under the Whirlpool and Raybo brand names for an initial capital contribution of about $22 million. This acquisition is expected to close in the fourth quarter of 1995. With that venture, Whirlpool will have regional manufacturing operations for refrigerators, washers, microwave ovens and air conditioners--the four products which account for more than 90 percent of major-appliance shipments in Asia. 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 began 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 this year. In February 1995, the Company acquired 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 September 1994, the Company sold its minority interest in MFCC, a joint venture which manufactures and markets vacuum cleaners in the North American market. The sale resulted in cash proceeds of $44 million and a pre-tax gain of $26 million. The after-tax gain was $18 million or $.24 per share. 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. 15 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 September 1995, the Company had repurchased approximately 966,000 shares for $50 million. The Company's net borrowings increased by $645 million in the first nine months due primarily to seasonal working capital needs, capital spending, restructuring spending, acquisition financing and the stock repurchase. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION AND OTHER MATTERS The financial position of the Company remains strong as evidenced by the September 30, 1995 balance sheet. The Company's total assets are $7.6 billion and stockholders' equity is $1.9 billion. The appliance business debt to invested capital ratio net of cash ("debt ratio") increased from 34% at December 31, 1994 to 44% at September 30, 1995 due primarily to seasonal working capital needs, restructuring spending, capital spending, Asian acquisitions, the stock repurchase and the effect of European currency movements on the Company's hedging strategy. The financial services debt 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. WFC's financing portfolio by business segment is as follows (in millions):
September 30, December 31, 1995 1994 ------------- ------------ Inventory $ 797 45% $ 652 41% Aerospace 424 24 465 29 Consumer 465 27 386 24 Commercial 15 1 25 2 Other 50 3 55 4 ------ ---- ------ ---- $1,751 100% $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 did not have a 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. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION BUSINESS UNIT NET SALES AND OPERATING PROFIT The following appliance business (WFC on an equity basis) data is presented as supplemental information (in millions): Net sales by Business Unit were as follows:
Third Quarter Better/(Worse) Nine Months Better/(Worse) 1995 1994 $ % 1995 1994 $ % ------ ------ ----- ----- ------ ------ ----- ----- North America $1,335 $1,295 $ 40 3 % $3,860 $3,798 $ 62 2 % Europe 624 622 2 0 1,825 1,724 101 6 Latin America 61 82 (21) (26) 189 232 (43) (19) Asia 91 51 40 78 247 146 101 69 Other (2) (4) 2 50 (4) (9) 5 56 ------ ------ ---- --- ------ ------ ----- --- Total Appliance Business $2,109 $2,046 $ 63 3 % $6,117 $5,891 $ 226 4 % ====== ====== ==== === ====== ====== ===== ===
Operating Profit by Business Unit was as follows:
Third Quarter Better/(Worse) Nine Months Better/(Worse) 1995 1994 $ % 1995 1994 $ % ------ ------ ----- ----- ------ ------ ----- ----- North America $ 132 $ 137 $ (5) (4)% $ 341 $ 389 $ (48) (12)% Europe 23 44 (21) (48) 101 103 (2) (2) Latin America 4 11 (7) (64) 18 35 (17) (49) Asia (13) (6) (7) N/M (36) (12) (24) N/M Restructuring - (5) 5 N/M - (9) 9 N/M Business Disposition - 26 (26) N/M - 60 (60) N/M Other (29) (37) 8 22 (97) (97) 0 0 ------ ------ ---- --- ------ ------ ----- --- Total Appliance Business $ 117 $ 170 $(53) (31)% $ 327 $ 469 $(142) (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 down significantly in the third quarter and down slightly for the first nine months from the prior year periods due to deteriorating economic conditions and distribution issues in several key markets. Asia had significant shipment and revenue growth as compared to the prior year periods but the increased operating loss was due primarily to planned costs related to the Company's strategy to expand its presence in Asia. 18 PART II. OTHER INFORMATION -------------------------- WHIRLPOOL CORPORATION AND SUBSIDIARIES Quarter Ended September 30, 1995 Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- a. The following are included herein: (11) Computation of earnings per share (27) Financial Data Schedule (99) Computation of the ratios of earnings to fixed charges b. Reports on Form 8-K: None. 19 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WHIRLPOOL CORPORATION (Registrant) By Bradley J. Bell ---------------------------------- Bradley J. Bell Vice President and Treasurer (Principal Financial Officer) November 6, 1995 23 EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE WHIRLPOOL CORPORATION AND SUBSIDIARIES (millions of dollars except earnings per share) Nine Months Ended September 30 --------------------- 1995 1994 ------- ------- Primary Average Shares Outstanding 73.8 74.2 Treasury Method (Average Market Price) Stock Options 0.7 1.1 Restricted Stock (RSVP) 0.3 0.3 ------ ------ Primary Average Shares Outstanding 74.8 75.6 ====== ====== Net Earnings $191.1 $249.2 RSVP Amortization, net of tax - 0.1 ------ ------ Primary Net Earnings $191.1 $249.3 ====== ====== Earnings Per Share $ 2.55 $ 3.30 ====== ====== Fully Diluated Average Shares Outstanding 73.8 74.2 Treasury Method (Average Market Price or End of Period, whichever is greater): Stock Options 1.0 1.2 Restricted Stock (RSVP) 0.3 0.3 Assumed Conversion of Debt 2.2 2.2 ------ ------ Fully Diluted Average Shares Outstanding 77.3 77.9 ====== ====== Net Earnings $191.1 $249.2 Interest Expense, net of tax 3.1 3.3 RSVP Amortization, net of tax - 0.1 ------ ------ Fully Diluted Net Earnings $194.2 $252.6 ====== ====== Earnings Per Share $ 2.51 $ 3.24 ====== ====== 20 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Third Quarter 10-Q for Whirlpool Corporation and is qualified in its entirety by reference to such financial statements. 1,000,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 144 0 2,130 56 995 3,551 3,447 1,861 7,614 3,608 978 81 0 0 1,824 7,614 6,117 6,254 4,654 4,703 22 0 104 243 96 191 0 0 0 191 2.55 2.51
EX-99 4 COMPUTATION OF THE RATIO OFEARNINGS TO FIXED CHARGES EXHIBIT 99 - COMPUTATION OF THE RATIOS OF EARNINGS TO FIXED CHARGES WHIRLPOOL CORPORATION AND SUBSIDIARIES (dollars in millions) Nine Months Ended September 30, 1995 ----------------------------------------- Appliance Financial Whirlpool Business Services Corporation ---------- ---------- ----------- Pretax earnings $222.1 $21.1 $243.2 Portion of rents representative of the interest factor 14.2 0.6 14.8 Interest on indebtedness 95.1 57.6 152.7 Amortization of debt expense and premium 0.4 0.1 0.5 WFC preferred stock dividend - 3.4 3.4 ------ ----- ------ Adjusted income $331.8 $82.8 $414.6 ====== ===== ====== Fixed charges - ------------- Portion of rents representative of the interest factor $ 14.2 $ 0.6 $ 14.8 Interest on indebtedness 95.1 57.6 152.7 Amortization of debt expense and premium 0.4 0.1 0.5 WFC preferred stock dividend - 3.4 3.4 ------ ----- ------ $109.7 $61.7 $171.4 ====== ===== ====== Ratio of earnings to fixed charges 3.02 1.34 2.42 ====== ===== ====== Ratio of earnings to fixed charges at September 30, 1994 5.47 1.41 4.11 ====== ===== ====== 22 -----END PRIVACY-ENHANCED MESSAGE-----