Washington,
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 |
_______
| Delaware | 38-1490038 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |
| 2000 North M-63, Benton Harbor, Michigan | 49022-2692 | |
| (Address of principal executive offices) | (Zip Code) | |
Title of each class | Name of each exchange on which registered | |
Common stock, par value | Chicago Stock Exchange and New York Stock Exchange | |
| ||
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yesx No¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes¨ Nox
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes¨ No¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | Yesý No¨ | ||||
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. | Yes¨ Noý | ||||
| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during | |||||
| the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such | |||||
| filing requirements for the past 90 days. | Yesý No¨ | ||||
| Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data | |||||
| File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months | |||||
| (or for such shorter period that the registrant was required to submit and post such files). | Yesý No¨ | ||||
| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§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. | ý | ||||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting | |||||
| company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | |||||
| (Check one) | |||||
Large | Accelerated | ||||
Smaller | |||||
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | Yes¨ Noý | ||||
The aggregate market value of the voting common stock of the registrant held by stockholders not including voting stock held by directors and executive 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) at the close of business on June 30, 20092011 (the last business day of the registrant’s most recently completed second fiscal quarter) was $3,019,566,403.
$6,018,623,824.
Document | Part of Form 10-K into which incorporated | |
The registrant’s proxy statement for the | Part III | |
ITEM 1.Business.December 31, 2011
| PAGE | ||
| Item 1. | ||
| Item 1A. | ||
| Item 1B. | ||
| Item 2. | ||
| Item 3. | ||
| Item 4. | ||
| Item 5. | ||
| Item 6. | ||
| Item 7. | ||
| Item 7A. | ||
| Item 8. | ||
| Item 9. | ||
| Item 9A. | ||
| Item 9B. | ||
| Item 10. | ||
| Item 11. | ||
| Item 12. | ||
| Item 13. | ||
| Item 14. | ||
| Item 15. | ||
| PART I | ||||
| ITEM 1. | BUSINESS. |
For
| Percent in 2009 | Year ended December 31 (millions of dollars) | ||||||||||
Class of Similar Products | 2009 | 2008 | 2007 | ||||||||
Home Laundry Appliances | 31% | $ | 5,345 | $ | 5,760 | $ | 5,678 | ||||
Home Refrigerators and Freezers | 30% | 5,200 | 5,825 | 5,833 | |||||||
Home Cooking Appliances | 17% | 2,809 | 3,128 | 2,995 | |||||||
Other | 22% | 3,745 | 4,194 | 4,902 | |||||||
Net Sales | 100% | $ | 17,099 | $ | 18,907 | $ | 19,408 | ||||
years:
| Millions of dollars | 2011 | 2010 | 2009 | |||||||||||||||||||
| Laundry Appliances | $ | 5,612 | 30 | % | $ | 5,435 | 30 | % | $ | 5,345 | 31 | % | ||||||||||
| Refrigerators and Freezers | 5,620 | 30 | % | 5,616 | 31 | % | 5,200 | 30 | % | |||||||||||||
| Cooking Appliances | 3,120 | 17 | % | 3,025 | 16 | % | 2,809 | 17 | % | |||||||||||||
| Other | 4,314 | 23 | % | 4,290 | 23 | % | 3,745 | 22 | % | |||||||||||||
| Net Sales | $ | 18,666 | 100 | % | $ | 18,366 | 100 | % | $ | 17,099 | 100 | % | ||||||||||
Whirlpool is a major supplier to Sears of laundry, refrigerator, dishwasher, and trash compactor home appliances. Sears markets some of the products that we supply to them under itsKenmore brand name. Sears is also a major outlet for ourWhirlpool,Maytag,KitchenAid, Jenn-Air,and Amanabrand products. In 2009, 2008 and 2007, approximately 10%, 11% and 12%, respectively, of our consolidated net sales were attributable to sales to Sears. More information regarding Whirlpool’s relationship with Sears can be found under the caption “Forward-Looking Perspective” in the “Management’s Discussion and Analysis” contained in the Financial Supplement to this Report.
In Europe, we market and distribute our major home appliances primarily under theWhirlpool,Maytag,Amana,Bauknecht,Ignis,Laden, andPolar brand names, and major and portable appliances under theKitchenAid brand name. In addition to our extensive operations in Western Europe, we have sales subsidiaries in
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Russia, Ukraine, Hungary, Poland, the Czech Republic, Slovakia, Greece, Romania, Bulgaria, Latvia, Estonia, Lithuania, Croatia, Morocco, and Turkey, with representative offices in Ukraine, Kazakhstan, Slovenia, Serbia and Montenegro. Whirlpool markets a full line of products under theWhirlpool,KIC, andIgnis brand names in South Africa.
Whirlpool’s European operations also sell products carrying theWhirlpool,Bauknecht, andIgnis brand names to distributors and dealers in Africa and the Middle East. Whirlpool has manufacturing facilities in France, Germany, Italy, Poland, Slovakia, South Africa, and Sweden.
Whirlpool, KIC and Ignis brand names in South Africa. Our European operations also market and distribute products under the Whirlpool, Bauknecht and Ignis brand names to distributors and dealers in Africa and the Middle East.
We are generally not dependent upon any one source for raw materials or purchased components essential to our business. In areas where a single supplier is used, alternative sources are generally available and can be developed within the normal manufacturing environment. Some unanticipated costs may be incurred in transitioning to a new supplier if a prior single supplier relationship was abruptly interrupted or terminated. ThereCost pressure has been continued cost pressureexperienced during 2011 in some areas, such as metalssteel, resins and oil-based commodities. Supply constraints due to environment impacts such as hurricanes, tsunamis, and floods have required the qualification and use of alternate materials, during mostsome of the year. In the later part of the year, costs in most of these areas started to show signs of relief, but remainwhich were at elevated levels.premium costs. We believe such raw materials and components will be available in adequate quantities to meet anticipatedforecast production schedules.
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4
Statements.
Statements.
Maytag Acquisition
On March 31, 2006, we completed our acquisition of Maytag. The aggregate purchase price for Maytag was approximately $1.9 billion, including approximately $848 million of cash and approximately 9.7 million shares of Whirlpool common stock. Maytag had consolidated net sales for the year ended December 31, 2005 of approximately $4.9 billion. With the acquisition, Whirlpool added an array of home appliance brands includingMaytag, Jenn-Air, Amana, Magic Chef,andAdmiral. We are realizing cost savings from all areas across the value chain including product manufacturing and marketing, global procurement, logistics, infrastructure and support areas, product research and development, and asset utilization. In 2007, we completed the sale of all Maytag adjacent businesses which were not part of the core appliance business.
Statements.
Name | Office | First Became an Executive Officer | Age | |||
Jeff M. Fettig | Director, Chairman of the Board and Chief Executive Officer | 1994 | 52 | |||
Michael A. Todman | Director and President, Whirlpool International | 2001 | 52 | |||
Marc R. Bitzer | President, Whirlpool North America | 2006 | 45 | |||
Bracken Darrell | Executive Vice President and President, Whirlpool Europe | 2009 | 47 | |||
Jose A. Drummond | Executive Vice President and President, Whirlpool S.A. | 2008 | 45 | |||
David T. Szczupak | Executive Vice President, Global Product Organization | 2008 | 54 | |||
Roy W. Templin | Executive Vice President and Chief Financial Officer | 2004 | 49 | |||
| Name | Office | First Became an Executive Officer | Age | ||||
| Jeff M. Fettig | Director, Chairman of the Board and Chief Executive Officer | 1994 | 54 | ||||
| Michael A. Todman | Director and President, Whirlpool International | 2001 | 54 | ||||
| Marc R. Bitzer | President, Whirlpool North America | 2006 | 47 | ||||
| Bracken Darrell | President, Whirlpool EMEA and Executive Vice President of Whirlpool Corporation | 2009 | 49 | ||||
| Jose A. Drummond | Executive Vice President and President, Whirlpool Latin America | 2008 | 47 | ||||
| David T. Szczupak | Executive Vice President, Global Product Organization | 2008 | 56 | ||||
| Larry M. Venturelli | Executive Vice President and Chief Financial Officer | 2012 | 51 | ||||
| Roy W. Templin | Executive Vice President, Finance | 2004 | 51 | ||||
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ITEM 1A. Risk Factors.
| ITEM 1A. | RISK FACTORS. |
Each of our operating segments operates in a highly competitive business environment and faces intense competition from a growing number of competitors, many of which have strong consumer brand equity. Several of these competitors, such as Electrolux, LG, Samsung, Bosch Siemens, Panasonic and General Electric are large, well-established companies, many ranking among the Global Fortune 150, and have demonstrated a commitment to success in the global market. Moreover, the United States customer base includes large, sophisticated trade customers who have many choices and demand competitive products, services and prices. Competition in the global appliance market is based on a number of factors including selling price, product features and design, performance, innovation, energy efficiency, quality, cost, distribution, and financial incentives, such as cooperative advertising, co-marketing funds, sales person incentives, volume rebates and terms. In the past, our competitors, especially global competitors with low-cost sources of supply and/or highly protected home markets outside the United States, have aggressively priced their products and/or introduced new products to increase market share. If we are unable to successfully compete in this highly competitive environment, our business and financial performance could be negatively affected.
The loss of or substantial declinefor the period in sales to any of our key trade customers, which include Sears, Lowe’s, Home Depot, Casas Bahia, Best Buy, Ikea, major buying groups, and builders, could adversely affect our financial performance. We sell to a sophisticated customer base of large trade customers that have significant leverage as buyers over their suppliers. Most of our products are not sold through long-term contracts, which facilitates the trade customers’ ability to change volume among suppliers. As the trade customers continue to become larger, theyamounts would be paid. Actual results may seek to use their position to improve their profitability by various means, including improved efficiency, lower pricing, and increased promotional programs. If we are unable to meet their requirements, our volume growth and financial results could be negatively affected. The loss of, or substantial
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decline in volume of, sales to Sears, Lowe’s, Home Depot, Casas Bahia, Best Buy, Ikea, major buying groups or builders, or any other trade customers to which we sell a significant amount of products, could adversely affect our financial performance. Additionally, if these trade customers lose market share, this loss could negatively impact our financial performance.
We face intense competition in the home appliance industry and failure to successfully compete may negatively affect our business and financial performance. Each of our operating segments operates in a highly competitive business environment and faces intense competition from a growing number of competitors, many of which have strong consumer brand equity. Several of these competitors, such as Electrolux, LG, Samsung, Bosch Siemens and General Electric are large, well-established companies that rank among the Global Fortune 150 and have demonstrated a commitment to success in the global market. Competition in the global market is based on a number of factors including performance, innovation, product features and design, energy efficiency, quality, cost, selling price, distribution, and financial incentives, such as cooperative advertising, co-marketing funds, sales person incentives, volume rebates, and terms. In the past, our competitors, especially global competitors with low-cost sources of supply outside the United States, have aggressively priced their products and/or introduced new products to increase market share. If we are unable to successfully compete in this highly competitive environment, our business and financial performance could be negatively affected.
Foreign currency fluctuations may affect our financial performance. We generate a significant portion of our revenue and incur a significant portion of our expenses in currencies other than the U.S. dollar. Changes in the exchange rates of functional currencies of those operations affect the U.S. dollar value of our revenue and earningssignificantly vary from our foreign operations. Recent extreme volatility in the foreign exchange markets has increased our risk. We use currency forwards and options to manage our foreign currency transaction exposures. We cannot completely eliminate our exposure to foreign currency fluctuations, which may adversely affect our financial performance. In addition, because our consolidated financial results are reported in dollars, if we generate sales or earnings in other currencies, the translation of those results into U.S. dollars can result in a significant increase or decrease in the amount of those sales or earnings.
reserves.
7
with competition laws and sales and trading practices. Results of legal proceedings cannot be predicted with certainty. Regardless of merit, litigationadditional lawsuits may be both time-consumingfiled. The impact of these and disruptive to our operationsother investigations and cause significant expense and diversion of management attention. We estimate loss contingencies and establish reserves as required by generally accepted accounting principles based on our assessment of contingencies where liability is deemed probable and reasonably estimable in light of the facts and circumstances known to us atlawsuits could have a particular point in time. Subsequent developments in legal proceedings may affect our assessment and estimates of the loss contingency recorded and could result in anmaterial adverse effect on our financial position, liquidity and results of operations in the period in which a liability would be recognized or cash flows for the period in which amounts would be paid. Actual results may significantly vary from our estimates.
operations.
We face inventory and other asset risk. We record a write-down for product and component inventories that have become obsolete or exceed anticipated demand or net realizable value. We also review our long-lived assets for impairment whenever events or changed circumstances indicate the carrying amount of an asset may not be recoverable. If we determine that impairment has occurred, we record a write-down equal to the amount by which the carrying value of the asset exceeds its fair market value. Although we believe our inventory and other asset related provisions are currently adequate, no assurance can be given that, given the unpredictable pace of product obsolescence, we will not incur additional inventory or asset related charges. Such charges could materially adversely affect our financial condition and operating results.
Fluctuations and volatility in the cost of raw materials and purchased components could adversely affect our profits. The primary materials used to produce and manufacture our products are steel, oil, plastic resins, and base metals, such as aluminum, copper, zinc, and nickel. On a global and regional basis, the sources and prices of those materials and components are susceptible to significant price fluctuations due to supply/demand trends, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, the economic climate, and other unforeseen circumstances. Material cost inflation is expected to be approximately $200 to $300 million in 2010, largely driven by increases in base metals, such as copper, aluminum, zinc and nickel, as well as component parts and steel. Continued significant increases in these and other costs in the future could materially affect our profits.
The ability of suppliers to deliver parts, components and manufacturing equipment to our manufacturing facilities, including our ability to manufacture without disruption, could affect our global business performance. We use a wide range of materials and components in the global production of our products and use numerous suppliers to provide materials and components. Because we generally do not have guaranteed supply arrangements with our suppliers and some key parts may be available only from a single supplier or a limited group of suppliers, we are subject to supply and pricing risks. In addition, certain proprietary component parts used in some of our products are provided by single-source unaffiliated third-party suppliers. We would be unable to obtain these proprietary component parts for an indeterminate period of time if these single-source suppliers were to cease or interrupt production or otherwise fail to supply these components to us, which could adversely affect our product sales and operating results. Our operations and operations at suppliers’ facilities are
8
subject to disruption for a variety of reasons, including, but not limited to, work stoppages, fire, earthquake, flooding, or other natural disasters. Such disruption could interrupt our ability to manufacture certain products. Any significant disruption could negatively impact our revenue and earnings performance.
Significant differences between actual results and estimates of the amount of future funding for our pension plans and postretirement health care benefit programs, and significant changes in funding assumptions or significant increases in funding obligations due to regulatory changes, could adversely affect our financial results. We have both funded and unfunded noncontributory defined benefit pension plans that cover most of our North American employees and certain foreign employees. We also have unfunded postretirement health care benefit plans for eligible retired employees. The Employee Retirement Income Security Act of 1974 (ERISA), the Pension Protection Act and the Internal Revenue Code govern the funding obligations for our U.S. pension plans, which are our principal pension plans. Our U.S. defined benefit plans were frozen as of December 31, 2006 for substantially all participants. For 2007 and beyond, Whirlpool employees may participate in an enhanced defined contribution plan.
As of December 31, 2009, our projected benefit obligations under our pension plans and postretirement health care benefit programs exceeded the fair value of plan assets by an aggregate of approximately $2,329 million ($1,568 million of which was attributable to pension plans and $761 million of which was attributable to postretirement health care benefits). Estimates for the amount and timing of the future funding obligations of these pension plans and postretirement health care benefit plans are based on various assumptions. These assumptions include discount rates, expected long-term rate of return on plan assets, and health care cost trend rates. These assumptions are subject to change based on changes in interest rates on high quality bonds, stock and bond market returns, and health care cost trend rates. Significant differences in results or significant changes in assumptions may materially affect our postretirement obligations and related future contributions and expenses.
Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brands. We consider our intellectual property rights, including patents, trademarks, trade secrets, and licensing agreements, to be a significant and valuable aspect of our business. We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright, and trade secret laws, as well as licensing agreements and third party nondisclosure and assignment agreements. Our failure to obtain or adequately protect our trademarks, products, new features of our products, or our processes may diminish our competitiveness.
9
with our customers, as well as to maintain financial accuracy and efficiency. Information technology system failures could disrupt our operations by causing transaction errors, processing inefficiencies, delays or cancellation of customer orders, the loss of customers, impediments to the manufacture or shipment of products, other business disruptions, or the loss of or damage to intellectual property through security breach.
changes in foreign country regulatory requirements;
various import/export restrictions and the availability of required import/export licenses;
imposition of foreign tariffs and other trade barriers;
political, legal, and economic instability;
foreign currency exchange rate fluctuations;
changes in foreign country tax rules, regulations and other requirements, such as changes in tax rates and statutory and judicial interpretations of tax laws;
inflation;
work stoppages and disruptions in the shipping of imported and exported products;
government price controls;
extended payment terms and the inability to collect accounts receivable; and
the inability to repatriate cash.
Additionally, as a U.S. corporation, we are subject to the Foreign Corrupt Practices Act, which may place us at a competitive disadvantage to foreign companies that are not subject to similar regulations. Additionally, any determination that we have violated the Foreign Corrupt Practices Act could have a material adverse effect on us.
Terrorist attacks, armed conflicts, natural disasters, and epidemics could affect our domestic and international sales, disrupt our supply chain, and impair our ability to produce and deliver our products. Such events could directly impact our physical facilities or those of our suppliers or customers, both in the United States and elsewhere.
We are subject to, and could be further subject to, governmental investigations or actions by other third parties.We are subject to various federal, foreign and state laws, including antitrust laws, violations of which can involve civil or criminal sanctions. Government regulators in various jurisdictions are currently investigating
10
alleged pricing practices in the global compressor industry, including our compressor business headquartered in Brazil. These investigations, as well as additional investigations by other governmental agencies, could result in civil or criminal charges against Whirlpool and its employees, and the imposition of fines and penalties. In addition, we have been named as a defendant in numerous related class action lawsuits in various jurisdictions, which seek damages in connection with the pricing of compressors, and additional lawsuits may be filed. The impact of these investigations and lawsuits could have a material adverse effect on our financial position, liquidity and results of operations.
A deterioration in labor relations could adversely impact our global business. As of December 31, 2009,2011, we had approximately 67,00068,000 employees. Of those employees, various labor unions with separate collective bargaining agreements represent approximately 60%59%. Our current collective bargaining agreements generally have three year terms. Due to the large number of collective bargaining agreements, we are periodically in negotiations with certain of the unions representing our employees. We may be subject to employee work stoppages that, if such events were to occur, may have a material adverse effect on our business, financial condition, or results of operations. Further, we cannot be assured that we will be able to renew collective bargaining agreements on the same or similar terms, or at all, which may also have a material adverse effect on our business, financial condition, or results of operations.
We generate a significant portion of our revenue and incur a significant portion of our expenses in currencies other than the U.S. dollar. Changes in the exchange rates of functional currencies of those operations affect the U.S. dollar value of our revenue and earnings from our foreign operations. We use currency forwards and options to manage our foreign currency transaction exposures. We cannot completely eliminate our exposure to foreign currency fluctuations, which may adversely affect our financial performance. In addition, because our consolidated financial results are reported in dollars, if we generate sales or earnings in other currencies, the translation of those results into dollars can result in a significant increase or decrease in the amount of those sales or earnings. Finally, the amount of legal contingencies related to foreign operations may fluctuate significantly based upon changes in the exchange rates and usually cannot be managed with currency forwards, options or other arrangements. Such fluctuations in exchange rates can significantly increase or decrease the amount of any legal contingency related to our foreign operations and make it difficult to assess and manage the potential exposure.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS. |
| ITEM 2. | PROPERTIES. |
Our principal executive offices are located in Benton Harbor, Michigan. On December 31, 2009,2011, our principal manufacturing operations were carried on at 3735 locations worldwide, 26 of which are located in 1112 countries outside the United States, primarily in the Europe region, and to a lesser extent in Asia, Latin America, and Mexico. Whirlpoolworldwide. We occupied a total of approximately 65.267 million square feet devoted to manufacturing,
11
service, sales and administrative offices, warehouse and distribution space. Over 33.836 million square feet of such space is occupied under lease. In general, allWhirlpool properties include facilities which are well maintained, suitably equipped,suitable and in goodadequate for the manufacture and distribution of Whirlpool’s products. The company’s major production sites by operating condition.
ITEM 3. Legal Proceedings.segment are as follows:
| North America: | ||
| United States: | Fort Smith, Arkansas; Amana, Iowa; Tulsa, Oklahoma | |
| Greenville, Clyde, Findlay, Marion and Ottawa, Ohio; | ||
| Cleveland, Tennessee | ||
| Mexico: | Celaya; Monterrey; Ramos Arizpe | |
| Latin America: | ||
| Brazil: | Itaiopolis; Joinville; Manaus; Rio Claro | |
| China: | Beijing | |
| Italy: | Riva di Chieri | |
| Slovakia: | Spisska Nova Ves | |
| Europe, Middle East and Africa: | ||
| Germany: | Neunkirchen; Schorndorf | |
| France: | Amiens | |
| Italy: | Trento; Cassinetta; Siena; Naples | |
| Poland: | Wroclaw | |
| Slovakia: | Poprad | |
| Sweden: | Norrkoping | |
| South Africa: | Isithebe | |
| Asia: | ||
| China: | ChangXing (Joint Venture); Shunde | |
| India: | Faridabad; Pune; Pondicherry | |
| ITEM 3. | LEGAL PROCEEDINGS. |
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 2009.
12
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
is incorporated herein by reference.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
| PART II | ||||
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS |
| AND ISSUER PURCHASES OF EQUITY SECURITIES. | |
High, low,
Market Price | High | Low | Close | ||||||
4Q2009 | $ | 85.01 | $ | 65.37 | $ | 80.66 | |||
3Q2009 | 73.84 | 41.34 | 69.96 | ||||||
2Q2009 | 49.96 | 28.44 | 42.56 | ||||||
1Q2009 | 49.08 | 19.19 | 29.59 | ||||||
4Q2008 | $ | 83.05 | $ | 30.19 | $ | 41.35 | |||
3Q2008 | 91.87 | 58.22 | 79.29 | ||||||
2Q2008 | 92.59 | 61.73 | 61.73 | ||||||
1Q2008 | 98.00 | 67.19 | 86.78 | ||||||
Cash dividends declared on Whirlpool common stock for each quarter during the years 2009 and 2008 are set forthdividend information can be found in Note 14 to the Consolidated Financial Statements contained in the Financial Supplement to this report.
During the March 2008 quarter, Whirlpool purchased approximately 1.1 million shares of Whirlpool common stock under a $500 million share repurchase program authorized by our Board of Directors on June 15, 2004. At March 31, 2008, there were no remaining funds authorized under this program.
Statements.
ITEM 6. Selected Financial Data.
The selected financial data for the five years ended December 31, 2009 with respect to the following line items are shown under the
| ITEM 6. | SELECTED FINANCIAL DATA. |
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS |
| OF OPERATIONS. | |
ITEM 7. Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations.
See “Management’s Discussion and Analysis” containedOperations” in the Financial Supplement to this report.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
Information with respect to market risk can be found under the caption
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
13
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Whirlpool’s Consolidated Financial Statements are containedincluded in the Financial Supplement to this report. Supplementary financial information regarding quarterly results of operations (unaudited) for the years ended December 31, 20092011 and 2008 is set forth2010 can be found in Note 14 to the Consolidated Financial Statements. For a list of financial statements and schedules filed as part of this report, see the Table of Contents to the Financial Supplement to this report on page F-1.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND |
| FINANCIAL DISCLOSURE. | |
| ITEM 9A. | CONTROLS AND PROCEDURES. |
None.
ITEM 9A. Controls and Procedures.
Disclosure controls and procedures.Whirlpool maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in our filings under the Securities Exchange Act is recorded, processed, summarized, and reported within the periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to Whirlpool’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
2011
.December 31, 2011 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in the Consolidated Financial Statements contained in the Financial Supplement to this report under the caption entitled “Report of Independent Registered Public Accounting Firm” and is incorporated herein by reference.
| ITEM 9B. | OTHER INFORMATION. |
There was no information required to be disclosed in a report on Form 8-K during the fourth quarter of 2009 that was not previously reported.
14
PART III
ITEM 10. Directors, and Executive Officers and Corporate Governance.
| PART III | ||||
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Greg Fritz
923-3487
ITEM 11. Executive Compensation.
| ITEM 11. | EXECUTIVE COMPENSATION. |
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND |
| RELATED STOCKHOLDER MATTERS. | |
15
directors and executive officers as a group, can be found under the captions “Security Ownership” and “Beneficial Ownership” in the Proxy Statement, which is incorporated herein by reference. Information relating to securities authorized under equity compensation plans can be found under the caption “Equity Compensation Plan Information” in the Proxy Statement, which is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR |
| INDEPENDENCE. | |
ITEM 14. Principal Accounting Fees and Services.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
PART IV
ITEM 15. Exhibits, Financial Statement Schedules.
| PART IV | ||||
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
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Signature Title / Director William D. Perez Director Michael D. White DATA Whirlpool Corporation (“Whirlpool”) is the world’s leading manufacturer of major home appliances with revenues of existing homes and mortgage interest rates as key indicators of industry demand. In addition to profitability, we also focus on country, brand, product and channel sales when assessing and forecasting financial results. items. Millions of dollars Consolidated Net Sales North America Europe Latin America Asia Other/Eliminations Consolidated In thousands Units Sold North America Europe Latin America Asia Other/Eliminations Consolidated North America net sales higher BEFIEX credits, Latin America net sales North America Europe Latin America Asia Consolidated Selling, General and Administrative Millions of dollars North America Europe Latin America Asia Corporate/Other Consolidated increased product innovation spending. Millions of dollars, except per share data Earnings from continuing operations Diluted net earnings from continuing operations per share Millions of dollars, except per share data Net earnings available to Whirlpool common stockholders Diluted net earnings per share available to Whirlpool common stockholders respective periods: following ranges: Millions of dollars Cash provided by operating activities Capital expenditures Proceeds from sale of assets/businesses Free cash flow believe that operating cash flow, together our suppliers as stated in our supplier agreements. As of December 31, thereof, plus accrued and unpaid interest. Millions of dollars Long-term debt obligations(1) Operating lease obligations Purchase obligations(2) Other long-term liabilities(3) Total(4)(5) Millions of dollars Change in assumption 0.25% increase in discount rate 0.25% decrease in discount rate 0.25% increase in long-term return on assets 0.25% decrease in long-term return on assets 0.50% increase in discount rate 0.50% decrease in discount rate 0.50% increase in long-term return on assets 0.50% decrease in long-term return on assets 1.00% increase in medical trend rates 1.00% decrease in medical trend rates December 31, 2011, remaining BEFIEX credits, business profitability, tax planning strategies, and enacted tax laws. the inflation index tables reduced available cash monetization by $62 million in 2011. warranty claims as new information becomes available. New product launches require a greater use of judgment in developing estimates until historical experience becomes available. Future events and circumstances could materially change our estimates and require adjustments to the warranty obligations. 4% of net sales in 2011 to in excess of 8% of net sales within our long range planning period. We performed a sensitivity analysis on our estimated fair value using the income approach, noting that a reduction in our operating profit margin in the terminal year of 100 basis points would result in failure of the first step of the impairment test. test. of approximately $260 million. future impairments. entered into agreements with Embraco and concluded their investigations. In authorities at various times through 2015. and to take other actions to minimize our potential exposure. The final outcome and impact of these matters, and any related claims and investigations that may be brought in the future are subject to many variables, and cannot be $301 million) was made on July 14, 2011, and the second of 490 million reais (equivalent to $275 million) was made during January 2012. At December 31, 2011 the outstanding accrual related to the final installment translated to approximately $261 million. The settlement amount was funded from available cash. 2013. statements. Among these factors are: (1) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers; (2) Whirlpool's ability to continue its relationship with significant trade customers and the ability of these trade customers to maintain or increase market share; (3) changes in economic conditions which affect demand for our products, including the strength of the building industry and the level of interest rates; regulations; and (19) the ability of Whirlpool to manage foreign currency fluctuations. report Net sales Expenses Cost of products sold Selling, general and administrative (exclusive of intangible amortization) Intangible amortization Restructuring costs Operating profit Other income (expense) Interest and sundry income (expense) Interest expense Gain on sale of investment Earnings from continuing operations before income taxes and other items Income tax (benefit) expense Earnings from continuing operations before equity earnings Equity in loss of affiliated companies Earnings from continuing operations Loss from discontinued operations net of tax of $3 for the year ended December 31, 2007 Net earnings Less: Net earnings available to noncontrolling interests Net earnings available to Whirlpool common stockholders Per share of common stock Basic earnings from continuing operations available to Whirlpool common stockholders Discontinued operations available to Whirlpool common stockholders, net of tax Basic net earnings available to Whirlpool common stockholders Diluted net earnings from continuing operations available to Whirlpool common stockholders Discontinued operations available to Whirlpool common stockholders, net of tax Diluted net earnings available to Whirlpool common stockholders Dividends Weighted-average shares outstanding (in millions) Basic Diluted December 31, Assets Current assets Cash and equivalents Accounts receivable, net of allowance for uncollectible accounts of $76 and $66 at December 31, 2009 and December 31, 2008, respectively Inventories Prepaid expenses Deferred income taxes Other current assets Total current assets Other assets Goodwill, net Other intangibles, net of accumulated amortization of $132 and $96 at December 31, 2009 and December 31, 2008, respectively Other assets Total other assets Property, plant and equipment Land Buildings Machinery and equipment Accumulated depreciation Total property, plant and equipment Total assets Liabilities and stockholders’ equity Current liabilities Accounts payable Accrued expenses Accrued advertising and promotions Employee compensation Notes payable Current maturities of long-term debt Other current liabilities Total current liabilities Noncurrent liabilities Long-term debt Pension benefits Postretirement benefits Other liabilities Total noncurrent liabilities Commitments and contingencies Stockholders’ equity Common stock, $1 par value, 250 million shares authorized, 105 million and 104 million shares issued at December 31, 2009 and December 31, 2008, respectively, 75 million and 73 million shares outstanding at December 31, 2009 and December 31, 2008, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock, 30 million shares and 31 million shares at December 31, 2009 and December 31, 2008, respectively Total Whirlpool stockholders’ equity Noncontrolling interests Total stockholder’s equity Total liabilities and stockholders’ equity Operating activities of continuing operations Net earnings Loss from discontinued operations Earnings from continuing operations Adjustments to reconcile net earnings from continuing operations to cash provided by operating activities from continuing operations: Depreciation and amortization Curtailment gain Gain on disposition of assets Gain on sale of investment (Decrease) increase in LIFO inventory reserve Equity in losses of affiliated companies, less dividends received Changes in assets and liabilities: Accounts receivable Inventories Accounts payable Restructuring charges, net of cash paid Taxes deferred and payable, net Accrued pension Employee compensation Other Cash provided by continuing operating activities Investing activities of continuing operations Capital expenditures Proceeds from sale of assets Proceeds from sale of Maytag adjacent businesses Investment in related businesses Cash used in investing activities of continuing operations Financing activities of continuing operations Proceeds from borrowings of long-term debt Net (repayments) proceeds from short-term borrowings Repayments of long-term debt Dividends paid Common stock issued Purchase of treasury stock Other Cash provided by (used in) financing activities of continuing operations Cash provided by operating activities from discontinued operations Effect of exchange rate changes on cash and equivalents Increase (decrease) in cash and equivalents Cash and equivalents at beginning of year Cash and equivalents at end of year Supplemental disclosure of cash flow information Cash paid for interest Cash paid for taxes Balances, December 31, 2006 Comprehensive income Net earnings Other comprehensive income Comprehensive income Adoption of ASC 740 Stock repurchased Stock issued Dividends declared Balances, December 31, 2007 Comprehensive income Net earnings Other comprehensive income Comprehensive income Stock repurchased Stock issued Dividends declared Balances, December 31, 2008 Comprehensive income Net earnings Other comprehensive income Comprehensive income Stock issued Dividends declared Balances, December 31, 2009 current period presentation. The effect of these reclassifications is not material. $600 million and $80 million of machinery and equipment no longer in use during 2011 and 2010. Net gains and losses recognized in cost of products sold were nominal for 2011, 2010 and 2009. $578 million, $532 million and $500 million in 2011, 2010 and 2009, respectively. taxes. Pronouncements exist. Reporting unit—Millions of dollars North America Embraco Total goodwill by operating segment: December 31, 2011 and 2010: December 31—Millions of dollars Trademarks Customer relationships Patents and non-compete agreements Total other intangibles assets, net year: We had no Level 3 assets or liabilities at comparable assets or liabilities. Assets and liabilities measured at fair value on a recurring basis at December 31, 2011 and 2010are as follows: December 31—Millions of dollars 2009 Money market funds(1) Net derivative contracts Available for sale investments 2008 Net derivative contracts Available for sale investments 2011 December 31—Millions of dollars Finished products Work in process Raw materials Less excess of FIFO cost over LIFO cost Total inventories 2010: The following table summarizes our debt at December 31, Millions of dollars Variable rate notes, maturing through 2009 Senior note—8.6%, maturing 2010 Senior note—6.125%, maturing 2011 Senior note—8.0%, maturing 2012 Medium-term note—5.5%, maturing 2013 Maytag medium-term note—6.5%, maturing 2014 Senior note—8.6%, maturing 2014 Maytag medium-term note—5.0%, maturing 2015 Senior note—6.5%, maturing 2016 Debentures—7.75%, maturing 2016 Other (various maturing through 2016) Less current maturities Total long-term debt, net of current maturities 2010: Millions of dollars 2010 2011 2012 2013 2014 Thereafter Total debt 2011 2010. Facility. Millions of dollars Balance at January 1 Warranties issued during the period Settlements made during the period Other changes Balance at December 31 Current portion Non-current portion Total Millions of dollars 2010 2011 2012 2013 2014 Thereafter Total noncancelable operating lease commitments Millions of dollars 2010 2011 2012 2013 2014 Thereafter Total purchase obligations entered into agreements with Embraco and concluded their investigations. In authorities at various times through 2015. and to take other actions to minimize our potential exposure. The final outcome and impact of these matters, and any related claims and investigations that may be brought in the future are subject to many variables, and cannot be 2010: When we hedge a foreign currency denominated payable or receivable with a derivative, the effect of changes in the foreign exchange rates are reflected currently in interest and sundry income (expense) for both the payable/receivable and the derivative. Therefore, as a result of the economic hedge, we do not elect hedge accounting. We also may utilize a cross-currency interest rate swap agreement to manage our exposure relating to certain intercompany debt denominated in one foreign currency that will be repaid in another foreign currency. At Millions of dollars Type of Hedge(2) Designated derivatives Foreign exchange forwards/options Commodity swaps/options Total designated derivatives Undesignated derivatives Foreign exchange forwards/options Commodity swaps/options Total undesignated derivatives Total derivatives Cash Flow Hedges—Millions of dollars Foreign exchange forwards/options Commodity swaps/options Interest rate swaps Fair Value Hedges—Millions of dollars Foreign exchange forwards/options Undesignated Hedges—Millions of dollars Foreign exchange forwards/options Commodity swaps 2011 Millions of dollars December 31, 2006 Unrealized gain (loss) Unrealized gain and prior service credit Tax effect Other comprehensive income (loss), net of tax Less: Other comprehensive income available to noncontrolling interests 11 1 — — 12 Other comprehensive income (loss) available to Whirlpool common stockholders December 31, 2007 Unrealized loss Unrealized loss and prior service credit Tax effect Other comprehensive loss, net of tax Less: Other comprehensive loss available to noncontrolling interests (3 ) (11 ) — — (14 ) Other comprehensive loss available to Whirlpool common stockholders December 31, 2008 Unrealized gain Unrealized loss and prior service cost Tax effect Other comprehensive income (loss), net of tax Less: Other comprehensive income available to noncontrolling interests 11 7 — — 18 Other comprehensive income (loss) available to Whirlpool common stockholders December 31, 2009 of common stock were calculated as follows: December 31—Millions of dollars Numerator for basic and diluted earnings per share—net earnings available to Whirlpool common stockholders Denominator for basic earnings per share—weighted-average shares Effect of dilutive securities—stock-based compensation Denominator for diluted earnings per share—adjusted weighted-average shares months December 31, 2011, approximately 3.2 million shares remain available for issuance under the 2010 OSIP. of stock options, performance stock units, performance shares, restricted stock and restricted stock units with terms of no more than 10 years. At December 31, OSIP. Weighted Average Black-Scholes Assumptions Risk-free interest rate Expected volatility Expected dividend yield Expected option life Thousands of shares, except per share data Outstanding at January 1 Granted Exercised Canceled or expired Outstanding at December 31 Exercisable at December 31 Options in thousands / dollars in millions, except per share data Number of options Weighted-average exercise price Aggregate intrinsic value Weighted-average remaining contractual term, in years 2011 The total fair value of shares vested during Stock units in thousands, except per share data Non-vested, December 31, 2008 Granted Canceled Vested and transferred to unrestricted Non-vested, December 31, 2009 2011. Millions of dollars 2009 Termination costs Non-employee exit costs Total 2008 Termination costs Non-employee exit costs Total 2007 Termination costs Non-employee exit costs Total Year ended December 31—Millions of dollars Current: Federal State and local Foreign Deferred: Federal State and local Foreign Total income tax (benefit) expense Year ended December 31—Millions of dollars Domestic Foreign Earnings from continuing operations before income taxes and other items Year ended December 31 Income tax rate computed at U.S. federal statutory rate U.S. government tax incentives Foreign government tax incentives Foreign tax rate differential Settlement of global tax audits U.S. foreign tax credits Foreign withholding taxes Deductible interest on capital Medicare Part D subsidy U.S. tax on foreign dividends and subpart F income Valuation allowances Impact of tax rate changes State and local taxes, net of federal tax benefit Real estate donations Other items, net Effective tax rate December 31—Millions of dollars Deferred tax liabilities Intangibles Property, plant and equipment LIFO inventory Hedging & Swaps Inventories Pensions Software costs Financial services leveraged leases Other Total deferred tax liabilities Deferred tax assets Loss carryforwards Pensions U.S. general business credit carryforwards Postretirement obligations Employee payroll and benefits Inventory prepayments Accrued expenses Receivable and inventory allowances Product warranty accrual Foreign tax credit carryforwards Restructuring costs Capital loss carryforwards Hedging Other Total deferred tax assets Valuation allowances for deferred tax assets Deferred tax assets, net of valuation allowances Net deferred tax assets withholding taxes payable to the various foreign countries. It is not practicable to estimate the amount of the deferred tax liability associated with these unremitted earnings. 2031. Millions of dollars Balance, January 1 Additions for tax positions of the current year Additions for tax positions of prior years Reductions for tax positions of prior years for: Changes in judgment Settlements during the period Lapses of applicable statute of limitation Balance, December 31 March 2010. During Millions of dollars 401 (k) Company contributions Millions of dollars Funded status Fair value of plan assets Benefit obligations Funded status Amounts recognized in the statement of financial position Noncurrent asset Current liability Noncurrent liability Amount recognized Amounts recognized in accumulated other comprehensive income (pre-tax) Net actuarial loss Prior service (credit)/cost Transition (asset)/obligation Amount recognized Millions of dollars Benefit obligation, beginning of year Service cost Interest cost Plan participants’ contributions Actuarial loss/(gain) Gross benefits paid less: federal subsidy on benefits paid Plan amendments New plans Special termination benefits Curtailments Settlements Foreign currency exchange rates Benefit obligation, end of year ABO, end of year Millions of dollars Fair value of plan assets, beginning of year Actual return on plan assets Employer contribution Plan participants’ contributions Gross benefits paid New plans Settlements Foreign currency exchange rates Fair value of plan assets, end of year Millions of dollars Service cost Interest cost Expected return on plan assets Amortization: Actuarial loss Prior service cost/(credit) Special termination benefit Curtailment loss/(gain) Settlement loss/(gain) One-time benefit (credit)/charge for new plan Net periodic benefit cost Millions of dollars Current year actuarial loss/(gain) Actuarial (loss)/gain recognized during the year Current year prior service cost/(credit) Prior service (cost)/credit recognized during the year Total recognized in other comprehensive income (pre-tax) Total recognized in net periodic benefit costs and other comprehensive income (pre-tax) 2011 Millions of dollars Actuarial loss Prior service (credit)/cost Total 2012 Discount rate Rate of compensation increase Health care cost trend rate Initial rate Ultimate rate Years to ultimate Discount rate Expected long-term rate of return on plan assets Rate of compensation increase Health care cost trend rate Initial rate Ultimate rate Years to ultimate Millions of dollars Effect on total of service and interest cost Effect on postretirement benefit obligations effects on our health care plan: Millions of dollars 2010 Millions of dollars 2010 2011 2012 2013 2014 2015-2019 Asset Category—Millions of dollars Cash and cash equivalents Equity securities: U.S. companies International companies Mutual funds(a) Common and collective funds(b) U.S. government and government agency securities U.S. corporate bonds and notes International government and government agency securities International corporate bonds and notes Limited partnerships(c) Real estate All other investments Millions of dollars Balance, December 31, 2008 Realized losses Unrealized losses Purchases, sales, issuances and settlements (net) Balance, December 31, 2009 Millions of dollars PBO Fair value of plan assets Millions of dollars PBO ABO Fair value of plan assets by geographic Millions of dollars Net sales 2009 2008 2007 Intersegment sales 2009 2008 2007 Depreciation and amortization 2009 2008 2007 Operating profit (loss) 2009 2008 2007 Total assets 2009 2008 2007 Capital expenditures 2009 2008 2007 Millions of dollars, except per share data 2009: Net sales Cost of products sold Net earnings available to Whirlpool common stockholders Per share of common stock: Basic net earnings Diluted net earnings Dividends Millions of dollars, except per share data 2008: Net sales Cost of products sold Net earnings available to Whirlpool common stockholders Per share of common stock: Basic net earnings Diluted net earnings DividendsWHIRLPOOL CORPORATION(Registrant)By: s/ ROY W. TEMPLIN S/ Larry M. VenturelliFebruary 22, 2012 February 17, 2010Roy W. Templin s/ JEFFS/ JEFF M. FETTIG Jeff M. Fettig (PrincipalJeff M. Fettig /S/ MICHAEL A. TODMAN Michael A. Todman /S/ LARRY M. VENTURELLI Larry M. Venturelli SAMUEL R. ALLEN* Director Samuel R. Allen GARY T. DICAMILLO* Director Gary T. DiCamillo KATHLEEN J. HEMPEL* Director Kathleen J. Hempel MICHAEL F. JOHNSTON* Director Michael F. Johnston WILLIAM T. KERR* Director William T. Kerr JOHN D. LIU* Director John D. Liu HARISH MANWANI* Director MILES L. MARSH* Director Miles L. Marsh MICHAEL A. TODMAN*Michael A. Todman and President, Whirlpool International/s/ ROY W. TEMPLIN Roy W. TemplinExecutive Vice President and Chief Financial Officer (Principal Financial Officer)ANTHONY B. PETITT*Anthony B. PetittVice President and Controller (Principal Accounting Officer)HERMAN CAIN*Herman CainDirectorGARY T. DICAMILLO*Gary T. DiCamilloDirectorKATHLEEN J. HEMPEL*Kathleen J. HempelDirectorMICHAEL F. JOHNSTON*Michael F. JohnstonDirectorWILLIAM T. KERR*William T. KerrDirectorMILES L. MARSH*Miles L. MarshDirectorWILLIAM D. PEREZ * Director17SignatureTitle PAUL G. STERN*Paul G. Stern JANICE D. STONEY*Janice D. StoneyDirectorMICHAEL D. WHITE* Director*By: s/ DANIEL F. HOPP Daniel F. Hopp Attorney-in-Fact February 17, 201022, 201218to 2009 Annual Report on Form 10-Kto 20102012 Proxy StatementTable of Contents F-2 F-22 F-23 F-24 F-25 F-26F-60 F-61 F-62 F-63 F-64 F-65MANAGEMENT’S DISCUSSION AND ANALYSIS OFCONDITION ANDRESULTS OF OPERATIONS(Millions of dollars, except share and employee data) 2011 2010 2009 2008 2007 CONSOLIDATED OPERATIONS Net sales $ 18,666 $ 18,366 $ 17,099 $ 18,907 $ 19,408 Restructuring costs 136 74 126 149 61 558 555 525 597 593 Operating profit 792 1,008 688 549 1,063 Earnings (loss) from continuing operations before income taxes and other items (28 ) 586 293 246 804 Net earnings from continuing operations 408 650 354 447 669 — — — — (7 ) Net earnings available to Whirlpool 390 619 328 418 640 Capital expenditures 608 593 541 547 536 Dividends 148 132 128 128 134 CONSOLIDATED FINANCIAL POSITION Current assets $ 6,422 $ 7,315 $ 7,025 $ 6,044 $ 6,555 Current liabilities 6,297 6,149 5,941 5,563 5,893 Accounts receivable, inventories and accounts payable, net 947 1,410 1,389 1,889 2,009 Property, net 3,102 3,134 3,117 2,985 3,212 Total assets 15,181 15,584 15,094 13,532 14,009 Long-term debt 2,129 2,195 2,502 2,002 1,668 Total debt 2,491 2,509 2,903 2,597 2,093 Whirlpool stockholders’ equity 4,181 4,226 3,664 3,006 3,911 PER SHARE DATA Basic net earnings from continuing operations $ 5.07 $ 8.12 $ 4.39 $ 5.57 $ 8.24 Diluted net earnings from continuing operations 4.99 7.97 4.34 5.50 8.10 Diluted net earnings 4.99 7.97 4.34 5.50 8.01 Dividends 1.93 1.72 1.72 1.72 1.72 53.50 54.48 48.48 39.54 48.96 Closing Stock Price—NYSE 47.45 88.83 80.66 41.35 81.63 KEY RATIOS Operating profit margin 4.2 % 5.5 % 4.0 % 2.9 % 5.5 % (0.2 )% 3.2 % 1.7 % 1.3 % 4.1 % 2.1 % 3.4 % 1.9 % 2.2 % 3.3 % 9.3 % 15.7 % 9.8 % 10.7 % 18.1 % 2.5 % 4.0 % 2.3 % 3.0 % 4.6 % Current assets to current liabilities 1.0 1.2 1.2 1.1 1.1 36.8 % 36.7 % 43.6 % 46.0 % 34.5 % 9.5 11.2 18.6 7.5 10.2 OTHER DATA Common shares outstanding (in thousands): Average number—on a diluted basis 78,143 77,628 75,584 76,019 79,880 Year-end common shares outstanding 76,451 76,030 74,704 73,536 75,835 Year-end number of stockholders 13,527 14,080 14,930 14,515 15,011 Year-end number of employees 68,231 70,758 66,884 69,612 73,682 (8.1 )% 3.8 % 5.8 % (8.5 )% 11.8 % (1) Depreciation method changed prospectively from a straight-line method to a modified units of production method in 2009. (2) Our earnings from continuing operations exclude certain dispositions adjacent to the Maytag acquisition. (3) Total Whirlpool stockholders’ equity divided by average number of shares on a diluted basis. (4) Earnings (loss) from continuing operations before income taxes and other items, as a percent of net sales. (5) Net earnings available to Whirlpool, as a percent of net sales. (6) Net earnings available to Whirlpool, divided by average Whirlpool stockholders’ equity. (7) Net earnings available to Whirlpool, divided by average total assets. (8) Total debt divided by total debt and total stockholders’ equity. (9) Closing stock price divided by diluted net earnings available to Whirlpool. (10) Stock appreciation plus reinvested dividends, divided by share price at the beginning of the period. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Supplement to the Form 10-K. Also, certainCertain references to particular information in the Notes to the Consolidated Financial Statements are made to assist readers.EXECUTIVE OVERVIEW$17approximately $19 billion and net earnings available to Whirlpool common stockholders of $328$390 million for the year ended December 31, 2009. in 2011. We are a leading producer of major home appliances in North America and Latin America and have a significant presence in markets throughout Europe and India. We have received worldwide recognition for accomplishments in a variety of business and social efforts, including leadership, diversity, innovative product design, business ethics, social responsibility and community involvement. We conduct our business through four reportable segments, which we define based on geography. Our reportable segments consist of North America, (55% of revenue), Europe (19% of revenue), Latin America, (22%EMEA and Asia. Our customer base includes large, sophisticated trade customers who have many choices and demand competitive products, services and prices. The charts below summarize the balance of revenue)net sales by reportable segment for 2011, 2010and Asia (4%2009, respectively:
revenue).We monitor country-specific economic factorsgross domestic product, consumer confidence, retail trends, housing startsGladiator GarageWorks, through stand-alone businesses that leverage our core competencies and completions, sales of existing homesbusiness infrastructure. mortgage interest rates as key indicators of industry demand. In addition to profitability, we also focus on country, brand, product and channel sales when assessing and forecasting financial results.During 2008 and 2009, we experienced significant macroeconomic challenges including instability in the financial markets. These challenges have impacted the global economy, the capital markets and global demand for our products. Although we have made significant progress in reducing cost in 2009 to better align with global demand, and in improving our liquidity position, we expect that we will continue to experience the effects of liquidity strain on our suppliers, continued low consumer confidence and consumer discretionary spending.Competition in the home appliance industry is intenseas a whole continued to face significant macroeconomic challenges across much of the world in all globalserve. In additionhave taken aggressive actions to expand our traditional competitors such as Electrolux, General Electric,operating margins and Kenmoreimprove our earnings. These actions include implementation of our previously announced cost-based price increases, continued investment in North America, there has beennew product innovation, execution of announced cost and capacity reductions, continued productivity improvements and legal actions taken to promote fair trade within the industry.emergence of strong global competitors such as LG, Bosch Siemens, Samsungantitrust investigation by the European Commission into the refrigeration compressor industry. While these settlements negatively impacted our 2011 results, they have removed significant uncertainty and Haier. In each geographic region, our customer base is consolidated and characterizedfinancial risk by large, sophisticated trade customers who have many choices and demand competitive products, services and prices. We believe that our productivity and cost controls, new innovative product introductions, and improved product price/mix will enhance our ability to respondbringing closure to these competitive conditions.FACTORS AFFECTING COMPARABILITYDuring the March 2009 quarter, we changed our method of depreciation prospectively for substantially all long-lived production machinery and equipment to a modified units of production depreciation method. Under this method, we record depreciation based on units produced, unless units produced drop below a minimum threshold at which point depreciation is recorded using the straight-line method. Prior to 2009, all machinery and equipment was depreciated using the straight-line method. We believe depreciating machinery and equipment based on units of production is a preferable method as it best matches the usage of assets with the revenuesF-2MANAGEMENT’SRESULTS OF OPERATIONS—(CONTINUED)derived from those assets. As a result of this change and our overall lower levels of production in 2009, our depreciation expense by operating segment decreased for 2009 as follows: North America—$46 million, Europe—$25 million, Latin America—$11 million and Asia—$1 million, for a total of $83 million. Net of amounts capitalized into ending inventories, gross margin increased for 2009 as follows: North America—$41 million, Europe—$19 million, Latin America—$11 million and Asia—$1 million, for a total of $72 million.For - (CONTINUED)year ended December 31, 2009,macroeconomic environment and maintain our position as the global number one home appliance maker. December 31, Consolidated 2011 Change 2010 Change 2009 Net sales $ 18,666 1.6 % $ 18,366 7.4 % $ 17,099 Gross margin 2,577 (5.0 ) 2,714 13.7 2,386 Selling, general and administrative 1,621 1.0 1,604 3.7 1,544 Restructuring costs 136 nm 74 nm 126 Interest and sundry income (expense) (607 ) nm (197 ) 10.7 (176 ) Interest expense (213 ) (5.4 ) (225 ) 2.7 (219 ) Income tax benefit (436 ) nm (64 ) 4.9 (61 ) Net earnings available to Whirlpool 390 (37.0 ) 619 88.7 328 Diluted net earnings available to Whirlpool per share $ 4.99 (37.5 )% $ 7.97 83.6 % $ 4.34 were $17 billion. by region: December 31, In thousands 2011 Change 2010 Change 2009 Units Sold North America 25,575 (2.0 )% 26,095 5.9 % 24,631 Latin America 11,830 1.4 11,661 16.1 10,047 EMEA 12,334 (0.1 ) 12,351 4.7 11,798 Asia 4,014 0.5 3,996 22.4 3,264 Consolidated 53,753 (0.6 )% 54,103 8.8 % 49,740 December 31, Millions of dollars 2011 Change 2010 Change 2009 Consolidated Net Sales North America $ 9,582 (2.1 )% $ 9,784 2.0 % $ 9,592 Latin America 5,062 7.8 4,694 26.7 3,705 EMEA 3,305 2.4 3,227 (3.3 ) 3,338 Asia 881 3.1 855 30.6 654 Other/eliminations (164 ) — (194 ) — (190 ) Consolidated $ 18,666 1.6 % $ 18,366 7.4 % $ 17,099 earnings availablesales increased 1.6% compared to Whirlpool common stockholders were $328 million, or $4.34 per diluted share, decreasing from $418 million or $5.50 per diluted share for2010 primarily due to the year ended December 31, 2008. The decrease in net sales and earnings reflects lower appliance industry demand resulting primarily from weaker economies within our North America and Europe regions and the unfavorablefavorable impact of foreign currency.Consolidated Net SalesThe table below summarizescurrency and higher BEFIEX credits recognized, partially offset by region consolidated net sales and units sold: 2009 Change 2008 Change 2007 $ 9,592 (11.0)% $ 10,781 (8.1)% $ 11,735 3,338 (16.9 ) 4,016 4.4 3,848 3,705 — 3,704 7.8 3,437 654 10.3 593 6.5 557 (190 ) — (187 ) — (169 ) $ 17,099 (9.6 ) $ 18,907 (2.6 ) $ 19,408 2009 Change 2008 Change 2007 24,631 (9.5)% 27,210 (10.4)% 30,352 11,798 (11.7 ) 13,365 (2.0 ) 13,641 10,047 14.5 8,777 5.7 8,303 3,264 20.8 2,703 5.7 2,558 — — (1 ) — (3 ) 49,740 (4.4 ) 52,054 (5.1 ) 54,851 Consolidated net sales decreased 9.6% compared to 2008 primarily due to lower unit shipments and the impact of unfavorable foreign currency.shipments. Excluding the impact of foreign currency, consolidated net sales decreased 5.8%0.4% compared to 2008.2008 decreased 2.6%2010 increased 7.4% compared to 20072009 primarily due to lowerhigher unit shipments, higher BEFIEX credits recognized and the favorable impact of foreign currency, partially offset by unfavorable product price/mix. Excluding the impact of foreign currency, consolidated net sales for 2010 increased 5.3% compared to 2009.consolidated net sales decreased 5.1% compared to 2007.Significant regional trends were as follows:decreasedincreased 0.7% in 2009 by 11.0%2010.20082010 primarily due to a 9.5% decrease in units sold. The decline in units sold is due to decreased industry demand resulting from continued weak economies in the U.S., Mexico and Canada in 2009. Additionally, net sales was negatively impacted by the unfavorablefavorable impact of foreign currency, which was partially offset by improved product price/mix.mix, higher BEFIEX credits recognized and a 1.4% increase in units sold. Excluding the impact of foreign currency North America net sales decreased 9.4% in 2009. NorthF-3MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)America net sales decreased in 2008 by 8.1% compared to 2007 primarily due to a 10.4% decrease in units sold. The decline in units sold is primarily due to decreased industry demand resulting from a weak U.S. economy in 2008. Partially offsetting the decrease in units sold was better product price/mix and higher market share in 2008 compared to 2007. Excluding the impact of foreign currency, North America net sales decreased 8.2% in 2008.Europe net sales decreased in 2009 by 16.9% compared to 2008, primarily due to an 11.7% decrease in units sold due to lower appliance industry demand and the unfavorable impact of foreign currency. Excluding the impact of foreign currency, Europe net sales decreased 11.2% in 2009. Net sales increased in 2008 by 4.4% compared to 2007, primarily due to favorable foreign currency and better product price/mix, partially offset by a decrease in unit volume due to lower market demand in the second half of the year. Excluding the impact of foreign currency, Europe net sales decreased 3.1% in 2008.were consistentincreased 3.0% in 20092011. Latin America net sales for 2010 increased 26.7% compared to 2008 as the unfavorable impact of foreign currency and lower BEFIEX credits recognized were fully offset by2009 primarily due to a 14.5%16.1% increase in units sold. The increase in units sold was a result of favorable economic conditions anddriven by strong industry growth in the Impostos sobre Produtos (“IPI”) sales tax holiday in Brazil. The IPI sales tax holiday was the primary driver of the reduction of BEFIEX credits monetized. This sales tax holiday was declared by the Brazilian government on certain appliances in our Latin America region beginningfirst half which moderated somewhat in the second quarterhalf of the year. In addition, net sales increased due to the favorable impact of foreign currency and extended through the remainder of 2009. During this holiday, we monetized reduced amounts ofhigher BEFIEX credits because our BEFIEX credits are monetized through therecognized, partially offset of IPI taxes due. The IPI sales tax holiday expired January 31, 2010.by unfavorable product price/mix. Excluding the impact of foreign currency and higher BEFIEX credits, Latin America net sales increased 7.1%13.7% in 2009. Net2010.increased 7.8%resulting in 2008 as compared to 2007, primarily due to an increase in volume of 5.7%the operations’ recorded net sales. After a favorable court decision in 2005, upheld by a December 2011 appellate court decision, we were able to recognize approximately $266 million, $225 million, and the favorable impact of foreign currency. The increase in volume was due to continued growth in the appliance industry, increased market share and favorable economic conditions throughout the region. Excluding the impact of foreign currency, Latin America net sales increased 1.7% in 2008.During the years ended December 31, 2009, 2008 and 2007, we monetized $69 million $168 millionof export credits during 2011, 2010 and $131 million of BEFIEX2009, respectively. Export credits respectively.recognized are not subject to income taxes. We expect to continue recognizingrecognize export credits as they are monetized. As of December 31, 2009, $693 million of these export credits remain. Futuremonetized; however, future actions by the Brazilian government could limit our ability to monetize these export credits.10.3% in 20093.1% compared to 20082010 primarily due to improved product price/mix, the favorable impact of foreign currency and a 20.8%0.5% increase in units sold offset partially by the impact of unfavorable foreign currency.sold. Excluding the impact of foreign currency, Asia net sales increased 18.4%2.3%. Asia net sales for 2010 increased 30.6%, led by results in 2009. Net sales increased 6.5% in 2008India and China, compared to 20072009 primarily due to a 5.7%22.4% increase in units sold. The increase in volume was due to continued growth in the appliance industry, primarily in India. Excluding the impact of foreign currency, Asia net sales increased 9.7%23.8% in 2008.2010.The consolidated gross margin percentage increased compared to 2008 due primarily to cost reduction initiatives and productivity improvements, partially offset by foreign currency and lower regional tax incentives associated with BEFIEX. 2009 Change 2008 Change 2007 12.9 % 2.9 pts 10.0 % (2.5 )pts 12.5 % 11.5 (2.5 ) 14.0 (2.6 ) 16.6 17.2 (4.0 ) 21.2 0.4 20.8 19.3 1.1 18.2 3.0 15.2 14.0 0.7 13.3 (1.6 ) 14.9 F-4 December 31, Percentage of net sales 2011 Change 2010 Change 2009 North America 11.3 % (0.5 ) pts 11.8 % (1.1 ) pts 12.9 % Latin America 20.0 (1.2 ) 21.2 4.0 17.2 EMEA 10.1 (3.0 ) 13.1 1.6 11.5 Asia 16.5 (0.7 ) 17.2 (2.1 ) 19.3 Consolidated 13.8 % (1.0 ) pts 14.8 % 0.8 pts 14.0 % MANAGEMENT’SOPERATIONS—OPERATIONS - (CONTINUED)increased in 2009decreased compared to 20082010 primarily due to significant increases in material costs, partially offset by continued productivity improvements and the favorable impact from product price/mix. Gross margin also reflects the favorable impact from $78 million in lower product recall charges and a $61 million supplier recovery payment received in 2011, partially offset by $50 million in higher LIFO adjustments and $27 million in lower postretirement curtailment gains. North America gross margin for 2010 decreased compared to 2009 primarily due to unfavorable product price/mix, higher material costs, $43 million in higher product recall charges, a $45 million variance in LIFO adjustments compared to 2009 and $18 million in lower postretirement curtailment gains. These items were partially offset by continued cost reductions, improved productivity and higher volumes.a postretirement curtailment gain associated with the suspensionfavorable impact of annual credits to retiree health savings accounts totaling $80 million. Additionally,foreign currency. Asia gross margin was positively impacted by a $41 million reduction in LIFO reserves resulting from cost deflation. These gross margin improvements were partially offset by the unfavorable impacts of lower volumes, foreign currency and $35 million in charges associated with a product recall. Gross marginduring 2010 decreased in 2008 compared to 20072009 primarily due to higher material and oil-related costs lower industry demand and lower productivity. Additionally, gross margin was positively impacted by certain asset sale gains totaling $31 million and postretirement curtailments totaling $15 million, which were more than offset by $42 million in higher reserves for LIFO resulting from cost inflation and a $32 million charge related tounfavorable product recall. These decreases wereprice/mix, partially offset by improved product price/mix. See Notes 4, 6 and 12the favorable impact of the Notes to the Consolidated Financial Statements for additional information related to LIFO, product recalls and the postretirement curtailment gains, respectively.Europe gross margin decreased in 2009 compared to 2008 due primarily to lower volumes, unfavorable foreign currency fluctuations, asset sale gains and insurance proceeds totaling $14 million recognized in 2008. These decreases were partially offset by cost reductions and productivity initiatives and lower material and oil-related costs. Gross margin decreased in 2008 compared to 2007 due primarily to lower productivity and industry demand, which were partially offset by improved product price/mix. Also contributing to lower gross margin were gains from asset sales of $9 million compared with $47 million recognized in 2007. Lower gains in 2008 associated with asset sales were partially offset by gains of $5 million from insurance proceeds.Latin America gross margin decreased in 2009 compared to 2008 due primarily to a reduction in regional tax incentives associated with BEFIEX, higher material and oil-related costs, lower price/mix and an operating tax settlement, offset by improved productivity and certain credits in the amount of $11 million related to refundable energy surcharges. See Note 6 of the Notes to the Consolidated Financial Statements for additional information related to the foreign operating tax settlement. Gross margin increased in 2008 compared to 2007 due primarily to improvements in product price/mix, productivity and regional tax incentives associated primarily with BEFIEX, which combined to more than offset higher material and oil-related costs.Asia gross margin increased in 2009 compared to 2008 primarily due to continued cost reductions and improved productivity and a $3 million asset sale gain, which were partially offset by lower product price/mix. Gross margin increased in 2008 as compared to 2007 due to improvements in product price/mix, productivity, inventory transition costs and volume, which more than offset higher material and oil-related costs. below summarizes selling, general and administrative expenses as a percentage of sales by region: 2009 As a %
of Sales 2008 As a %
of Sales 2007 As a %
of Sales $ 653 6.8 % $ 851 7.9 % $ 791 6.7 % 362 10.8 414 10.3 391 10.2 275 7.4 306 8.3 277 8.1 97 14.8 98 16.5 91 16.3 157 — 129 — 186 — $ 1,544 9.0 % $ 1,798 9.5 % $ 1,736 8.9 % F-5 December 31, Millions of dollars 2011 2010 2009 North America $ 658 6.9 % $ 662 6.8 % $ 653 6.8 % Latin America 370 7.3 329 7.0 275 7.4 EMEA 333 10.1 320 9.9 362 10.8 Asia 115 13.1 114 13.3 97 14.8 Corporate/other 145 — 179 — 157 — Consolidated $ 1,621 8.7 % $ 1,604 8.7 % $ 1,544 9.0 % MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDSelling, general and administrative expenses remained flat compared to RESULTS OF OPERATIONS—(CONTINUED)2010In 2009, consolidated selling,, with unfavorable foreign currency and increased brand investments offset by lower employee incentive compensation. Selling, general and administrative expenses as a percent of consolidated net sales in 2010 decreased compared to the prior year,2009, primarily as a result of infrastructure cost reductions and lower brand investments. In 2008, consolidated selling,due to favorable leverage on increased net sales. Selling, general and administrative expenses as a percentin 2010 increased approximately $54 million compared to 2009 in Latin America, primarily due to the unfavorable impact of foreign currency and higher infrastructure spending to support higher sales volumes.sales,sales. In 2010, research and development costs increased $32 million or 6.4% compared to 2007,2009 to $532 million or 2.9% of consolidated net sales. The increases in 2011 and 2010 were primarily due to lower sales volume and higher brand investment, partially offset by lower infrastructure costs and $20 million in gains associated with asset sales. Additionally, this increase was impacted by a $12 million operating tax credit recorded by our Latin America region during 2007.Restructuring initiatives resulted in charges of $126 million, $149 million and $61 million in 2009, 2008, and 2007, respectively, reflecting ongoing efforts to optimize our global operating platform. These charges are included in restructuring in our Consolidated Statements of Income and primarily consist of charges to restructure the cooking platform in Latin America, shift refrigeration and dishwasher capacity within Europe and North America, shift cooking capacity within North America, restructure the laundry platforms in North America, Europe and Asia and reorganize the salaried workforce throughout North America and Europe.On October 27, 2008, management committed to a workforce reduction plan to reduce our employee base worldwide betweenof 2008 and2011, the beginning of 2010.On August 28, 2009, we announced changesCompany committed to our North American manufacturing operations whichrestructuring plans (the "2011 Plan") that will result in substantial cost and capacity reductions. Including previously announced restructuring initiatives, we expect to incur approximately $500 million of total costs beginning in the closurefourth quarter 2011 with completion expected by the end of our manufacturing facility in Evansville, Indiana in mid-2010. 2013.currently expect thatto incur approximately 1,100 full-time positions will be eliminated as a result$405 million of future cash expenditures related to the closure.For additional2011 Plan. We incurred totaland the impact by operating segment, seeactivities can be found in Note 10 and Note 13 of the Notes to the Consolidated Financial Statements.for 2009 increased $410 million compared to 2010 to $607 million, primarily driven by $75 million from $100charges related to the settlement of the Brazilian collection dispute and Embraco antitrust matters of $528 million in 20082011 compared to $175$146 million in 2009. The increase in2010. In addition, 2011 reflects the unfavorable impact of foreign currency. During 2010, interest and sundry expense inincreased $22 million compared to 2009 wasto $197 million, primarily due to higher charges incurred for legal contingencies and legal defense,relating to the Embraco antitrust matters of approximately $40 million, partially offset by the favorable impacts of foreign currency. Interest and sundry expense for 2008 increased by $37 million from $63 million in 2007 to $100 million in 2008. Higher expense in 2008 was primarily due to the impact of foreign currency and an impairment charge of $9 million in our Europe segment associated with an available for sale investment, partially offset by higher interest income.litigationthe Brazilian collection dispute and Embraco antitrust matters, see Note 6 of the Notes to the Consolidated Financial Statements.increased for 2009decreased $12 million compared to 20082010 to $213 million, primarily due to the combination of higherlower interest rates, andpartially offset by higher average monthly debt levels,levels. During 2010, interest expense increased compared to 2009, as 2009 benefited from an $8 million reduction in accrued interest as a result of an operating tax settlement. In addition, 2010 included higher amortization of debt issuance costs, partially offset partially by a reduction in accrued interest of $18 million as a result of entering into a special program in Brazilexpense due to settle tax liabilities. Interest expense in 2008 was consistent with 2007 as higherlower average debt levels were offset by lowerand interest rates. effective income tax ratebenefit was a benefit of 20.6%$436 million, $64 million, and $61 million in 2011, 2010 and 2009, and 81.7% in 2008 and an expense of 14.5% in 2007.respectively. The reductionincrease in tax benefit from 2008in 2011 compared to 2010 and 2009 is primarily due to an increase in profitability, changes in dispersion of global income and the unfavorable impact of audits and settlements. Thea reduction in tax expense in 2007 to a benefit in 2008 is primarily due to a decline in profitability,pre-tax earnings, higher energy tax credits generated in the U.S. in 2008United States from the production of certain eligible energy efficient appliances as well as a combination of certainF-6MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)discrete itemsand higher non-taxable BEFIEX credits recognized during the year, dispersion of global income, tax credit availability, and tax planning activities.in Brazil. For additional information about our consolidated tax provision, see Note 11 of the Notes to the Consolidated Financial Statements.Earnings from Continuing OperationsThe following table summarizes the difference between income tax expense at the United States statutory rate of Earnings from continuing operations were $354 million in 2009 compared to $447 million35% and $669 million in 2008 and 2007, respectively, due to the factors described above. 2009 2008 2007 $ 354 $ 447 $ 669 4.68 5.88 8.37 Net Earnings Available to Whirlpool Common StockholdersNet earnings available to Whirlpool common stockholders were $328 million in 2009 compared to $418 million and $640 million in 2008 and 2007, respectively, due toincome tax benefit at effective worldwide tax rates for the factors described above. Earnings were impacted by $7 million in losses from discontinued operations for 2007. 2009 2008 2007 $ 328 $ 418 $ 640 4.34 5.50 8.01 Millions of dollars 2011 2010 2009 Earnings (loss) before income taxes and other items United States $ (240 ) $ (256 ) $ (110 ) Foreign 212 842 403 Earnings (loss) before income taxes and other items (28 ) 586 293 Income tax computed at United States statutory rate (10 ) 205 103 U.S. government tax incentives, including Energy Tax Credits (379 ) (230 ) (125 ) Foreign government tax incentives, including BEFIEX (100 ) (103 ) (44 ) Foreign tax rate differential (13 ) (46 ) (31 ) U.S. foreign tax credits (37 ) (28 ) (19 ) Valuation allowances 11 (9 ) 10 Deductible interest on capital — (7 ) (15 ) State and local taxes, net of federal tax benefit (4 ) (2 ) 1 Medicare Part D subsidy — — 12 Foreign withholding taxes 10 12 15 Non-deductible government settlements 30 33 — U.S. tax on foreign dividends and subpart F income 26 49 10 Settlement of global tax audits 10 56 22 Other items, net 20 6 — Income tax computed at effective worldwide tax rates $ (436 ) $ (64 ) $ (61 ) For the year ended December 31, 2010, weto be in the range of $6.50 to $7.00, and free cash flow and industry demand for the year2012 to be inwithin the range of $400 to $500 million. Within North America we expect demand to increase 2-4% and within Europe we expect demand to remain flat. Within Latin America and Asia we expect demand to increase 5-10% and 3-5%, respectively. Material cost inflation is expected to increase by approximately $200 to $300 million, largely driven by increases in component parts, steel and base metals, such as copper, aluminum, zinc and nickel. We expect to offset these higher costs with productivity improvements, new product introductions, improved product price/mix and administrative and infrastructure cost reductions. Our innovation product pipeline continues to grow and drive higher average sales values. In addition, consumer and trade response to our new product offerings has been positive, and we continue to accelerate our global branded consumer products strategy of delivering relevant innovation to markets worldwide.Millions of dollars, except per share data Current Outlook Estimated earnings per diluted share, for the year ending December 31, 2012 $5.00 — $5.50 Including: BEFIEX ($60 to $80 million) 0.80 — 1.00 Restructuring expense ($250 - $270 million) (2.30) — (2.50) Free cash flow $100 — $150 Including: Pension plan contributions (250) — (250) (385) — (385) Restructuring cash outlays (279) — (279) BEFIEX 60 — 80 Industry demand North America —% — 3% Latin America 2% — 5% EMEA (5%) — (2%) Asia 2% — 4% 20102012 cash provided by operations determined in accordance with generally accepted accounting principles (GAAP) in the United States (GAAP) to free cash flow, a non-GAAP measure. Management believes that free cash flow provides shareholdersstockholders with a relevant measure of liquidity and a useful basis for assessing Whirlpool’s ability to fund its activities and obligations. There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similarly named non-GAAP measures whose calculations may differ from our calculations. We define free cash flow as cash provided by continuing operations after capital expenditures and proceeds from the sale of assets/businesses.F-7MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)The shown here are based uponon many estimates and are inherently subject to change based on future decisions made by management and the boardBoard of directorsDirectors of Whirlpool, and significant economic, competitive and other uncertainties and contingencies. 2010 Outlook $ 925 – $ 1,025 (525 ) – (575 ) — – 50 $ 400 – $ 500 Agreements with trade customersWe enter into agreements with our trade customers in the ordinary course of business. Most of our products are not sold through long-term agreements. Most trade customers have the ability to change volume among suppliers.We regularly negotiate with major trade customers and manufacturers regarding supply arrangements for future periods beyond the current year. Sears is a major trade customer for both our OEM and Whirlpool branded products, which accounted for approximately 10%, 11% and 12% of our consolidated net sales for 2009, 2008 and 2007, respectively. The products and volumes we supply and the revenues we obtain may be significantly different in the future than those which currently exist. Based on current supply arrangements, we anticipate maintaining a significant, but reduced, level of OEM volume beginning in 2010. In the past, when faced with a potential volume reduction from any one particular segment of our trade distribution network, we generally have been able to offset the decline through increased sales throughout our broad distribution network. We expect to continue to grow our own brand sales, supported by significant innovation, through our full distribution trade network and execution of our brand-focused value creation strategy.Millions of dollars Current Outlook Cash provided by operating activities $ 600 — $ 700 Capital expenditures (500 ) — (550 ) Proceeds from sale of assets/businesses — — — Free cash flow $ 100 — $ 150 The volumeWe regularly review our capital structure and timingliquidity priorities, which include funding the business through capital and engineering spending to support innovation and productivity initiatives, funding our pension plan and term debt liabilities, payment of refrigerationlegacy legal liabilities, return to shareholders and air conditioning production impactspotential acquisitions in our cash flowscore business and/or strategic adjacent business opportunities. These priorities are aligned with our goal to return our credit ratings to pre-recession levels.consists of increased production in the first half of the year to meet increased demand in the summer months.The funding markets have been volatile during the majority of 2008 and 2009 and we have experienced negative global economic trends.conditions for most of 2011, experiencing higher material costs, recessionary demand levels in developed markets and slowing growth in emerging markets. To succeed in this environment, we have aggressively taken stepsannounced aggressive actions to furtherimprove our overall operating performance and financial condition, including cost-based price increases across all markets and plans to reduce all areas ofour cost structure and production capacity, primarily in North America and working capital. As a result ofEMEA. Based on the global volatilityactions taken and challenging economic trends,announced in 2011, we decided to exit the commercial paper market during the December 2008 quarter and initiated borrowing under our committed bank line of credit (“Credit Agreement”), provided by a syndicate of highly-rated banks. Outside the U.S., short-term funding is provided by bank borrowings on uncommitted lines of credit.On February 27, 2009, we entered into an Amendment (the “First Amendment”) to the Credit Agreement to assure flexibility in future credit availability. The First Amendment increased the spread over LIBOR to 3%, the spread over prime to 2% and the utilization fee to be paid, if amounts borrowed exceed $1.1 billion, to 1% and replaced the facility fee with an unused commitment fee of 0.50%.MANAGEMENT’SOPERATIONS—OPERATIONS - (CONTINUED)On August 13, 2009,December 31, 2011 and 2010 we entered intohad no borrowings outstanding under credit facilities. We were in compliance with financial covenant requirements at December 31, 2011 and 2010.second Amendmentcontagion effect on the region and contribute to the general instability and uncertainty in the European Union. At December 31, 2011, Belgium is the only European country that has cash and cash equivalents and third-party receivables exceeding 1% of our consolidated assets.Credit Agreement (the “Second Amendment”)U.S. funded pension plans, offset by cash generated from operations.Millions of dollars 2011 2010 2009 Cash provided by (used in): Operating activities $ 530 $ 1,078 $ 1,550 Investing activities (596 ) (606 ) (499 ) Financing activities (166 ) (495 ) 144 Effect of exchange rate changes on cash (27 ) 11 39 Net increase (decrease) in cash and cash equivalents $ (259 ) $ (12 ) $ 1,234 further assure flexibilitythe settlement of the Brazilian collection dispute, funding of our United States pension plans of $298 million and lower net earnings, partially offset by significant reductions in future credit availability. inventory. Cash provided by operating activities in 2010 decreased $472 million compared to 2009, primarily from required increases in inventory to support product availability and product transition, partially offset by higher net earnings and more favorable terms of collection of accounts receivable and of payment to suppliers. In addition, the significant slowing of sales growth in the second half of 2010 resulted in higher than normal inventory levels of approximately three days.Second Amendment dividestiming of cash flows from operations varies significantly within a quarter primarily due to changes in production levels, sales patterns, promotional programs, funding requirements as well as receivable and reducespayment terms. Dependent on timing of cash flows, the location of cash balances, as well as the liquidity requirements of each country, external sources of funding are used to support working capital requirements. Due to the variables discussed above, cash flow used in operations during the year was significantly in excess of our quarter-end balances.$2.2 billion credit facility into a $1.35 billion tranche maturing on August 13, 2012 (the “Extending Tranche”) and a $522 million tranche maturing December 1, 2010 (the “Non-Extending Tranche”). For the Extending Tranche, the Second Amendment provides a utilization feelaws regarding supplier payment terms. The approved directive generally requires payment terms to be paid,30 days from the invoice date unless otherwise stated in the contract. An extension of up to 60 days is allowed if both parties agree to the terms. Countries within the European Union are required to adopt this directive within 2 years. We continue to monitor this situation as these changes, once adopted, could affect our cash flows to suppliers and from customers, since our payment terms to affected suppliers are generally longer than from affected customers.borrowed exceed 50% of the facility, of 0.50%, and for the Non-Extending Tranche, the utilization feedue, remain to be paid, if amounts borrowed exceed 50% of the facility, is 1%. The interest margin over LIBOR charged will be based on Whirlpool’s credit rating.2009, there2011 and 2010, approximately balancecommercial paper or credit facility borrowings outstanding.ourthis credit facility.On May 4, 2009,agreement and are in compliance with financial covenant requirements.(1) $350$300 million aggregate principal amount of 8.000% Notes4.85% notes due 2012June 15, 2021. Proceeds from the issuance were used to repay $300 million in term debt that matured in June 2011. The notes contain customary covenants that limit our ability to incur certain liens or enter into certain sale and (2) $500 million aggregatelease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount of 8.600% Notes due 2014. The proceeds from the notes were used for general corporate purposes.We believe that our operating cash flow, together with access to sufficient sources of liquidity, will be adequate to meet our ongoing funding requirements. We are in compliance with financial covenants in our credit facility for all periods presented.Pension and Postretirement Benefit PlansDefined Benefit PlansOn August 28, 2009, we announced the closure of our manufacturing facility in Evansville, Indiana in mid-2010. The announcement triggered a curtailment in our pension plan for Evansville hourly employees, resulting in a one-time curtailment loss of $6.6 million included in net periodic cost with an offset to other comprehensive income, net of tax. During 2009, we recorded the entire loss in our Consolidated Statement of Income as a component of cost of products sold. The closure of the Evansville facility also triggered a curtailment in our U.S. retiree healthcare plan, resulting in a curtailment gain. The curtailment gain will be recognized in our Consolidated Statement of Income as a component of cost of products sold as the employees terminate, which is expected to occur in 2010.On June 16, 2009, the Board of Directors authorized the option for the company to use up to $100 million of company stock to fund the U.S. pension plans. If we elect to partially fund the U.S. pension plans in company stock, contributions may be made on a periodic basis from treasury stock, or, with the prior approval of the Finance Committee of the Board of Directors, from authorized, but unissued shares. As of December 31, 2009, we have not used company stock to fund our U.S. pension plans.On February 9, 2009, we announced the indefinite suspension of the annual credit to retirement health savings accounts for the majority of active participants. The result of the suspension was a curtailment gain of $89 million.On August 1, 2008, we amended certain retiree medical benefits associated with our Newton, Iowa manufacturing facility to be consistent with those benefits provided by the Whirlpool Corporation Group Benefit Plan. This amendment resulted in a reduction in the postretirement benefit obligation of $229 million with a corresponding increase to other comprehensive income, net of tax, within equity of our Consolidated Balance Sheet at December 31, 2009.F-9MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)401(k) Defined Contribution PlanDuring the March 2009 quarter we announced an indefinite suspension of company matching contributions to our 401(k) defined contribution plan covering substantially all U.S. employees. We also announced that our automatic company contributions equal to 3% of employees’ eligible pay will be contributed in company stock. During the December 2009 quarter we announced the reinstatement of company matching contributions to our 401(k) defined contribution plan, covering substantially all U.S. employees, effective March 2010.For additional information about pension and postretirement benefit plans see Note 12 of the Notes to the Consolidated Financial Statements.Share Repurchase ProgramIn June 2004, our Board of Directors authorized a share repurchase program of up to $500 million. During 2007, we repurchased 3.8 million shares at an aggregate purchase price of $368 million and during the three months ended March 31, 2008, we repurchased 1.1 million shares at an aggregate purchase price of $97 million under this program. At March 31, 2008, there were no remaining funds authorized under this program.On April 23, 2008, our Board of Directors authorized a new share repurchase program of up to $500 million. Share repurchases are made from time to time on the open market as conditions warrant. During 2008, we repurchased 1.9 million shares at an aggregate purchase price of $150 million under this program. There were no repurchases during 2009. At December 31, 2009, there were $350 million of remaining funds authorized under this program.Sources and Uses of CashWe expect to meet our cash needs for 2010 from cash flows from continuing operations, cash and equivalents and financing arrangements. Our cash and equivalents were $1.4 billion at December 31, 2009 compared to $146 million at December 31, 2008.Cash Flows from Operating Activities of Continuing OperationsCash provided by continuing operating activities in 2009 was $1,550 million, an increase of $1,223 million compared to 2008. Cash provided by continuing operations reflects lower payments for inventory, lower cash payments for accounts payable and other operating accruals and lower employee compensation payments, partially offset by lower collections of accounts receivable. Cash provided by continuing operating activities in 2008 was $327 million, a decrease of $600 million compared to the year ended December 31, 2007. Cash provided by continuing operations for 2008 reflects lower cash earnings primarily from our North America and Europe segments compared to 2007. Cash provided by continuing operations also reflects lower accounts payable due to adjusting volume based on demand and higher pension contributions. The above decreases in cash flows were partially offset by a decrease in accounts receivable and lower restructuring spending.Cash Flows from Investing Activities of Continuing OperationsCash used in investing activities from continuing operations was an outflow of $499 million in 2009 compared to an outflow of $433 million last year. The increase in cash used in investing activities was primarily due to lower proceeds from the sale of assets in 2009 and higher investments primarily associated with business acquisition activity in our international locations. Cash used in investing activities from continuing operations in 2008 was an outflow of $433 million compared to an outflow of $331 million during 2007. The increase in cashF-10MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)used in investing activities was primarily due to 2007 receipt of proceeds from the sale of certain Maytag discontinued businesses of $100 million, lower proceeds from the sale of assets in 2008, and higher capital spending.The goal of our global operating platform is to enhance our competitive position in the global home appliance industry by reducing costs, driving productivity and quality improvements, and accelerating our rate of innovation. We plan to continue our comprehensive worldwide effort to optimize our regional manufacturing facilities, supply base, product platforms and technology resources to better support our global products, brands and customers. We intend to make additional investments to improve our competitiveness in 2010. Capital spending is expected to be between $525 and $575 million in 2010 in support of our investment in innovative product technologies and our global operating platform initiatives.Cash Flows from Financing Activities of Continuing OperationsCash provided by financing activities from continuing operations for 2009 compared to 2008 was an inflow of $144 million in the year ended December 31, 2009 compared to an inflow of $141 million for the year ended December 31, 2008. The current year reflects proceeds received related to two debt offerings totaling $850 million while the prior year reflects proceeds received related to the issuance of $500 million of 5.5% notes due March 1, 2013. For additional information about our $850 million debt offerings, see Note 5 of the Notes to the Consolidated Financial Statements. The current year also reflects net repayments of short-term borrowings and long-term debt repayments totaling $572 million compared to net repayments of $30 million in 2008. During 2009, we paid dividends to common stockholders totaling $128 million, paid debt financing fees of $38 million and received proceeds from the issuance of common stock related to option exercises of $21 million. During 2008, we repurchased stock totaling $247 million, paid dividends to common stockholders totaling $128 million and received proceeds from the issuance of common stock related to option exercises of $21 million.Cash provided by financing activities from continuing operations for 2008 compared to 2007 was an inflow of $141 million in the year ended December 31, 2008 compared to an outflow of $696 million for the year ended December 31, 2007. The year ended December 31, 2008 reflects proceeds received related to the issuance of $500 million of 5.5% notes due March 1, 2013 and the repayment of $125 million of 9.1% debentures. Net proceeds of short-term borrowings were $101 million for the year ended December 31, 2008 compared to net repayments of $243 million in 2007. During 2008, we repurchased stock totaling $247 million, paid dividends to common stockholders totaling $128 million and received proceeds from the issuance of common stock related to option exercises of $21 million. During 2007, we repurchased stock totaling $368 million, paid dividends to common stockholders totaling $134 million and received proceeds from the issuance of common stock related to option exercises of $68 million.OFF-BALANCE SHEET ARRANGEMENTSWhirlpool has guarantee arrangements in place in a Brazilian subsidiary. As a standard business practice in Brazil, the subsidiary guarantees customer lines of credit at commercial banks, supporting purchases from Whirlpool, following its normal credit policies. If a customer were to default on its line of credit with the bank, the subsidiary would be required to satisfy the obligation with the bank, and the receivable would revert back to the subsidiary. As of December 31, 2009 and 2008, these amounts totaled $300 million and $203 million, respectively. Our only recourse related to these agreements is legal or administrative collection efforts directed against the customer.F-11MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED) Payments due by period Total 2010 2011 &
2012 2013 &
2014 Thereafter $ 3,583 $ 563 $ 969 $ 1,287 $ 764 897 186 285 178 248 1,004 278 480 131 115 41 41 — — — $ 5,525 $ 1,068 $ 1,734 $ 1,596 $ 1,127 Payments due by period Millions of dollars Total 2012 Thereafter $ 2,949 $ 510 $ 1,316 $ 791 $ 332 Operating lease obligations 835 184 261 176 214 798 275 272 120 131 1,230 180 535 330 185 11 11 — — — 428 58 101 92 177 457 385 52 20 — $ 6,708 $ 1,603 $ 2,537 $ 1,529 $ 1,039 (1)(1) Interest payments related to long-term debt are included in the table above. For additional information about our financing arrangements, see Note 5 of the Notes to the Consolidated Financial Statements. (2)(2) Purchase obligations include our “take-or-pay” contracts with materials vendors and minimum payment obligations to other suppliers. (3) Other long-term liabilities include our expected 2010 U.S. pensionRepresents the minimum contributions required by law estimated based on current interest rates, asset return assumptions, legislative requirements and foreign pension fund contributionsother actuarial assumptions at December 31, 2011. Management may elect to contribute amounts in addition to those required by law. See Note 12 of the amount of $41 million. Required contributionsNotes to the Consolidated Financial Statements for future years depend on certain factors that cannot be determined at this time.additional information.(4) Represents required contributions to our foreign funded pension plans only. See Note 12 of the Notes to the Consolidated Financial Statements for additional information. (5) Represents our portion of expected benefit payments under our retiree healthcare plan. (6) For additional information regarding legal settlements, see Note 6 of the Notes to the Consolidated Financial Statements. (7) The table does not include short-term credit facility and commercial paper borrowings. For additional information about short-term borrowings, see Note 5 of the Notes to the Consolidated Financial Statements. (5)Not included in the above table are tax payments associated with uncertain tax positions as we are unable to estimate the period of payment.U.S. (“GAAP”)United States (GAAP) requires management to make certain estimates and assumptions. We periodically evaluate these estimates and assumptions, which are based on historical experience, changes in the business environment and other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates.F-12MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)among other assumptions, the discount rate, expected long-term rate of return on plan assets and health care cost trend rates. These assumptions are subject to change based on interest rates on high quality bonds, stock and bond markets and medical cost inflation, respectively. As permitted by GAAP, actualActual results that differ from our assumptions are accumulated and amortized over future periods and therefore, generally affect our recognized expense and accrued liability in such future periods. While we believe that our assumptions are appropriate given current economic conditions and actual experience, significant differences in results or significant changes in our assumptions may materially affect our pension and other postretirement benefit obligations and related future expense.as of at December 31, 20092011 and preliminary retirement benefit costs for 20102012 were prepared using the assumptions that were determined as of at December 31, 2009.2011. The following table summarizes the sensitivity of our December 31, 20092011 retirement obligations and 20102012 retirement benefit costs of our U.S.United States plans to changes in the key assumptions used to determine those results: Estimated increase
(decrease) in 2010
pension cost Estimated increase
(decrease) in
Projected Benefit
Obligation for the
year ended
December 31, 2009 Estimated increase
(decrease) in 2010
Other
Postretirement
Benefits cost Estimated increase
(decrease) in Other
Postretirement Benefit
Obligation for the
year ended
December 31, 2009 $ (1.6 ) $ (102.1 ) $ 0.7 $ (14.1 ) 1.4 105.2 (0.7 ) 15.1 (6.1 ) — — — 6.1 — — — (3.4 ) (201.1 ) 1.3 (28.1 ) 2.5 213.5 (1.5 ) 30.3 (12.2 ) — — — 12.2 — — — — — 1.8 31.7 — — (1.7 ) (28.4 ) Estimated increase (decrease) in Million of dollars 2012 Expense United States Pension Plans Discount rate +/-.50% $ (1)/0 $ (213)/225 Expected long-term rate of return on plan assets +/-.50% (13)/13 — Other Postretirement Benefit Plan Discount rate +/-.50% 2/(2) (11)/11 Expected long-term rate of return on plan assets +/-.50% — — Health care cost trend rate +/-.50% — 5/(5) * Projected benefit obligation (PBO) for pension plans and accumulated postretirement benefit obligation (APBO) for other postretirement benefit plan. purposes in accordance with GAAP guidance.purposes. These differences may result in deferred tax assets or liabilities, which are included in our Consolidated Balance Sheets. We are required to assess the likelihood that deferred tax assets, which include net operating loss carryforwards, foreign tax credits and deductible temporary differences, are expected to be realizable in future years. Realization of our net operating loss and foreign tax credit deferred tax assets is supported by specific tax planning strategies and where possible considers projections of future profitability. We provide a valuationF-13MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)allowance to reduce our deferred tax assets to an amount that willIf recovery is not more likely than not, be realizedwe provide a valuation allowance based on estimates of future taxable income in the various taxing jurisdictions, and the amount of deferred taxes that are ultimately realizable. If future taxable income is lower than expected or if tax planning strategies are not available as anticipated, we may record additional valuation allowances through income tax expense in the period such determination is made. Likewise, if we determine that we are able to realize our deferred tax assets in the future in excess of net recorded amounts, an adjustment to the deferred tax asset will increase income in the period such determination is made.20092011 and 2008,2010, we had total deferred tax assets of $2,275 million$2.8 billion and $2,212 million,$2.3 billion, respectively, net of valuation allowances of $180$208 million and $147$193 million, respectively. Our effectiveincome tax ratebenefit or expense has ranged from (81.7)% to 33.9%fluctuated considerably over the pastlast five years from a current year tax benefit of $(436) million to tax expense of $117 million and has been influenced primarily by energy tax credits, non-taxable BEFIEX credits, audit settlements and adjustments, tax planning strategies, enacted legislation, and dispersion of global income. A 1.0% increase in our effective tax rate would have decreased 2009 earnings by approximately $3 million. Future changes in the effective tax rate will be subject to several factors, including enacted laws, tax planning strategies, business profitability and the expiration of the energy tax credit legislation at the end of 2010.Ourprogram.program (BEFIEX). These credits reduce Brazilian federal excise taxes on domestic sales, resulting in an increase in the operations’ recorded net sales. Based on a recalculation of available credits andAfter a favorable court decision in the2005, upheld by a December 2005 quarter,2011 appellate court decision, we were able to recognize approximately $69$266 million, $168$225 million, and $131$69 million of export credits during 2011, 2010 and 2009, 2008 and 2007, respectively. As of December 31, 2009, approximately $693 million of exportExport credits remain.recognized are not subject to income taxes. We recognize exports credits as they are monetized; however, future actions by the Brazilian government could limit our ability to monetize these export credits. BEFIEX credits are not subjectAs of December 31, 2011, approximately $238 million of future cash monetization remained, including $60 million of related court awarded fees, which will be payable in subsequent years. A Brazilian law change to income taxes.reflectsrepresents our best estimate of expected costs at the time products are sold. Warranty accruals are adjusted for known or anticipatedF-14MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)New product launches require a greater use of judgment in developing estimates until historical experience becomes available. For additional information about warranty obligations, see Note 6 of the Notes to the Consolidated Financial Statements.Intangible ValuationsWe sell products under a numberIntangiblestrademarks, many of which we developed. Trademark development costs are expensed as incurred. We also purchasegoodwill and trademark assets and goodwill in acquisitions.assets. Upon acquisition, the purchase price is first allocated to identifiable assets and liabilities, including trademark assets, based on estimated fair value, with any remaining purchase price recorded as goodwill. TrademarksMost trademarks and goodwill are considered indefinite lived intangible assets and as such are not amortized. We have two reporting units where goodwill is recorded which includeOur North America region and Embraco reporting segment in our Latin America region.region, have goodwill balances of $1,723 million and $4 million, respectively as of December 31, 2011. There have been no changes to our reporting units or allocations of goodwill by reporting units. We have trademark assets in our North America and Europe regions. Forecasted financial statements utilized in the valuationregions with $1,473 million and $53 million of our reporting units and forecasted revenue amounts utilized in determining the fair valuesrecorded book value, respectively as of our trademarks are based upon Whirlpool’s current long range plans which are consistent with commercially available industry expectations.December 31, 2011. We test indefinite lived intangibles for impairment as of November 30 each year and more frequently if indicators of impairment exist.value, as determined by its discounted cash flows.value. If the book value of a reporting unit exceeds its fair value, we perform the second step of the impairment test to determine the amount of goodwill impairment loss to be recorded.test. In the second step, we determineestimate an implied fair value of the reporting unit’s goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill (including any unrecognized intangible assets). The difference between the total fair value of the reporting unit and the fair value of all the assets and liabilities other than goodwill is the implied fair value of that goodwill. The amount of impairment loss is equal to the excess of the book value of the goodwill over the implied fair value of that goodwill.determineestimate fair value based primarily on ausing the best information available to us, including market information and discounted cash flow model whichprojections also referred to as the income approach. The income approach uses a reporting unit’s projection of estimated operating results and cash flows that is an accepted valuation technique. Considerable management judgmentdiscounted using a weighted-average cost of capital that is necessarydetermined based on current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs and number of units, estimates of future expected changes in operating margins and cash expenditures. Other estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. We validate our estimates of fair value under the income approach by comparing the values to evaluatefair value estimates using a market approach. A market approach estimates fair value by applying cash flow multiples to the impact ofreporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and macroeconomic changesinvestment characteristics of the reporting units. Finally, we consider the implied control premium and to estimate future cash flows from our reporting units.Significant Assumptions in evaluating GoodwillIn assessing goodwill forconclude whether the implied control premium is reasonable based on other recent market transactions.for the North America reporting unit, significant assumptions used in our discounted cash flow modeltest performed as of November 30, 2009 included revenue growth rates, a2011, no impairment of goodwill was determined to exist. The estimated fair value of our North America operating segment exceeded its carrying value by approximately 11%.term growth rate andrange plan. Adverse changes in the operating environment for the home appliance industry, an increase in the discount rate.rate or our inability to meet the operating margins at the forecasted rates may result in future impairment charges.Revenue growth ratesForecasted cash flows used in the discounted cash flowsflow model wereare based uponon our long range plan for the next threefour years and range from -12% to 6%. Subsequent to this three year period, we applied expected growth rates to revenues which were consistent with commercially available industry market value and volume forecasts. The long terminclude a 2% residual growth rate usedthereafter. The residual growth rate was 2% based uponon the compound average growth rate for the U.S.United States T-7 appliance industry (T-7 refers to the following appliance categories: washers, dryers, refrigerators, freezers, dishwashers, ranges and compactors) over a 25 year period, and was also consistent with commercially available industry market value and volume forecasts.F-15MANAGEMENT’SOPERATIONS—OPERATIONS - (CONTINUED)11%10.5% used in our discounted cash flow model, as of the November 30, 20092011 assessment, was developed using the capital asset pricing model through which a weighted average cost of capital was derived. The discount rate was estimated using the risk free rate, market risk premium, and cost of debt prevalent as of the valuation date. The Beta and capital structure were estimated based on an analysis of comparable guideline companies. In addition, a risk premium was included to account for the risks inherent in the cash flows and to reconcile the fair value indicated by the discounted cash flow model to Whirlpool’s public market equity value at November 30, 2009.Other Considerations2011. We performed sensitivity analysis on our estimated fair value using the income approach, noting that an increase in evaluating GoodwillAdditionally,the discount rate of approximately 100 basis points would result in assessing goodwillfailure of the first step of the impairment for the North America reporting unit, we considered the implied control premium and concluded the implied control premium was reasonable based on other recent market transactions. estimated fair value of our North America reporting unit has historically exceededtrademarks are estimated and compared to the carrying value. We estimate the fair value byof these intangible assets using the relief-from-royalty method, which requires assumptions related to projected revenues from our annual long-range plan; assumed royalty rates that could be payable if we did not own the trademarks; and a substantial amount. As of our November 30, 2009 valuation,discount rate. We recognize an impairment loss when the estimated fair value of our North America reporting unit exceeded the indefinite-lived intangible asset is less than its carrying value by approximately 25%.Our methodology for evaluating goodwill for impairment has not changed sincevalue.2008. We2011, no impairment of trademarks was determined to exist. The fair values for all of our trademarks tested exceed their carrying values by more than 7% with the exception of one trademark which has a carrying value of $14 million.updatednot performed any interim impairment tests as none of the triggering events contained in guidance within ASC 350 “Intangibles—Goodwill and Other” have occurred.revenue projections discussed above based on our currentannual long range plan and current industry and economic conditions. The long term growth ratevary from brand to brand. Similar to our goodwill projections, adverse changes in the operating environment for the North America reporting unit has not changed fromappliance industry or our inability to grow revenues at the rateforecasted rates may result in a future impairment charge. We performed sensitivity analysis on our estimated fair value noting that was useda 10% reduction of forecasted revenues would result in an impairment of approximately $10 million.last annual impairment test.These assumptions couldtrademarks, we considered factors that affect the intrinsic royalty rates that would hypothetically be adversely impacted by certainpaid for the use of the risks discussedtrademark. The most significant factors in “Risk Factors”determining the intrinsic royalty rates include the overall role and importance of the trademarks in Item 1Athe particular industry, the profitability of the products utilizing the trademarks, and the position of the trademarked products in a given market segment. Based on this report.Intangible ValuationsIn assessing theanalysis, we determined royalty rates of 2-3% for our value brands, 4% for our mass market brands and 6% for our super premium brand. We performed sensitivity analysis on our estimated fair value noting that a reduction of trademarks, we utilize a relief fromthe royalty method. Ifrates used for the carrying amountvaluation of a trademark exceeds its fair value,100 basis points would result in an impairment loss is recognized in an amount equal to the excess. Considerable judgment is necessary to estimate key assumptions involved in valuing our trademarks, including projected revenues, royalty rates and applicable discount rates.The premium added considered that we have reduced the projected revenue from the forecasts used in previous years due in part to lower industry demand driven by the current economic conditions in our respective markets. Based on this analysis, we determined discount rates ranging from 11.0%9.5% to 11.5% (11.0% to 11.5%11%. We performed sensitivity analysis on our estimated fair value noting that an increase in 2008).In determining royaltythe discount rates used for the valuation of our trademarks, we considered factors that affect the intrinsic royalty rates that100 basis points would hypothetically be paid for the useresult in an impairment of approximately $75 million.trademarks. The most significant factors used in determiningassessing fair value are outside the intrinsic royalty rates include the overall rolecontrol of management and importance of the trademarks in the particular industry, the profitability of the products utilizing the trademark and trade name intangibles, and the position of the trademarked products in a given market segment. Based on this analysis, we determined royalty rates ranging from 2.0% to 5.0% (0.5% to 5.0% in 2008).Based on the compound annual growth rate of the U.S. T-7 appliance industry over the past 25 years of 2%, and the strength of our trademarks in the marketplace, anyit is reasonably likely that assumptions and estimates can change in the projected revenues or discount rate utilized in the valuation of our trademarks would notfuture periods. These changes can result in a material impairment charge.F-16MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)NEWJune 2009,September 2011, the Financial Accounting Standards Board (“FASB”("FASB") issuedamended Accounting Standards Codification (“ASC”("ASC") 105, “Generally Accepted Accounting Principles” (formerly Statement350, "Intangibles-Goodwill and Other". Under the amendment, an entity may assess qualitative factors to determine whether it is more likely than not that the fair value of Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards Codificationa reporting unit is less than its carrying amount, including goodwill. If determined to be necessary, the two-step impairment test shall be used to identify potential goodwill impairment and measure the Hierarchyamount of Generally Accepted Accounting Principles”). ASC 105 establishes the FASB ASC as the single source of authoritative nongovernmental U.S. GAAP.a goodwill impairment loss to be recognized, if any. The standardamendment is effective for annual and interim and annual periods endinggoodwill impairment tests performed for fiscal years beginning after SeptemberDecember 15, 2009.2011. We adopted the provisions of the standardthis amendment on September 30, 2009,January 1, 2012 which did not have a material impact on our consolidated financial statements.2009,2011, the FASB issued accountingFinancial Accounting Standards Board ("FASB") amended Accounting Standards Codification ("ASC") 220, “Presentation of Comprehensive Income.” This amendment will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The amended guidance, contained within ASC 810, “Consolidation”, regarding the consolidation of variable interest entities (formerly SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”). ASC 810 is intended to improve financial reporting by providing additional guidance to companies involved with variable interest entities and by requiring additional disclosures about a company’s involvement in variable interest entities. This standardwhich must be applied retroactively, is effective for interim and annual periods endingbeginning after NovemberDecember 15, 2009. 2011, with earlier adoption permitted. In addition, in December 2011, the FASB issued an amendment to this accounting standard which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement.We adopted the provisions of the standardthis amendment on January 1, 2010,2012 which did not have a material impact on our consolidated financial statements.June 2009,May 2011, the FASB issuedamended ASC 860, “Transfers820, "Fair Value Measurement." This amendment is intended to result in convergence between U.S. GAAP and Servicing” (formerly SFAS No. 166, “Accounting for Transfers ofInternational Financial Assets”Reporting Standards (“IFRS”). ASC 860 requires more information about transfers of financial assets and where companies have continuing exposure to the risk related to transferred financial assets. It eliminates the concept of a qualifying special purpose entity, changes the requirements for derecognizing financial assets,measurement of and requires additional disclosure.disclosures about fair value. This standardguidance clarifies the application of existing fair value measurements and disclosures, and changes certain principles or requirements for fair value measurements and disclosures. The amendment is effective for interim and annual periods endingbeginning after NovemberDecember 15, 2009.2011. We adopted the provisions of the standardthis amendment on January 1, 2010,2012 which did not have a material impact on our financial statements.In April 2009, the FASB issued ASC 825, “Financial Instruments” (formerly FASB Staff Position 107-1, “Interim Disclosures about Fair Value of Financial Instruments”). ASC 825 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies, as well as in annual financial statements. This standard also requires those disclosures in summarized financial information at interim reporting periods ending after June 15, 2009. We adopted the provisions of ASC 825 on June 30, 2009. See Notes 3 and 5 of the Notes to the Consolidated Financial Statements for information related to the fair value of our financial instruments.In March 2008, the FASB issued the disclosure requirements within ASC 815, “Derivatives and Hedging” (formerly SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB No. 133”). ASC 815 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. The disclosure requirements apply to all derivative instruments within the scope of ASC 815. The standard also applies to non-derivative hedging instruments and all hedged items designated and qualifying under ASC 815. We adopted the disclosure requirements of ASC 815 on January 1, 2009. For additional information regarding derivative instruments and hedging activities, see Note 7 of the Notes to the Consolidated Financial Statements.In December 2007, the FASB issued accounting guidance contained within ASC 805, “Business Combinations” (formerly SFAS No. 141(R), “Business Combinations”). ASC 805 requires us to continue to follow the guidance in SFAS 141 for certain aspects of business combinations, with additional guidance providedF-17MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)defining the acquirer, the accounting for transaction costs and contingent consideration, recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, assets and liabilities arising from contingencies, defining a bargain purchase and recognizing and measuring goodwill or a gain from a bargain purchase. In addition, adjustments associated with changes in tax contingencies that occur after the measurement period, not to exceed one year, are recorded as adjustments to income. This statement was effective for all business combinations for which the acquisition date is on or after the beginning of an entity’s first fiscal year that begins after December 15, 2008; however, the guidance in this standard regarding the treatment of income tax contingencies is retrospective to business combinations completed prior to January 1, 2009. We adopted ASC 805 on January 1, 2009.In December 2007, the FASB issued accounting guidance contained within ASC 810, “Consolidation”, regarding noncontrolling interests (formerly SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”). ASC 810-10-65 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We adopted ASC 810-10-65 on January 1, 2009. As a result, we have reclassified financial statement line items within our Consolidated Balance Sheets and Statements of Income for the prior period to conform with this standard. Additionally, see Note 8 of the Notes to the Consolidated Financial Statements for disclosure reflecting the impact of ASC 810-10-65 on our reconciliation of comprehensive income and stockholders’ equity.derivative financial instruments. Derivative financial instrumentsderivatives. Derivatives are viewed as risk management tools and are not used for speculation or for trading purposes. Derivative financial instrumentsDerivatives are generally contracted with a diversified group of investment grade counterparties to reduce exposure to nonperformance on such instruments.2009,2011, a 10% favorable or unfavorable exchange rate movement in each currency in our portfolio of foreign currency contracts would have resulted in an incremental unrealized gain or loss of approximately $168 million, while a 10% favorable shift would have resulted in an incremental unrealized gain of approximately $168$185 million. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the re-measurement of the underlying exposures.thatthe prices of which are not fixed directly through supply contracts. As of December 31, 2009,2011, a 10% favorable or unfavorable shift in commodity prices would have resulted in an incremental $50 million gain or a $50loss of approximately $32 million, lossrespectively, related to these contracts.F-18MANAGEMENT’SOPERATIONS—OPERATIONS - (CONTINUED)In JanuaryStandard & Poor’s and Fitch Ratings lowered our senior unsecured debt rating from “BBB” to “BBB-” and our short-term corporate credit and commercial paper ratings from “A-2” to “A-3” and “F-2” to “F-3”, respectively, based on weakened operating performance and the pullbackcompressor business headquartered in discretionary consumer spending. Also in January 2009, Moody’s Investor Services lowered our senior unsecured rating from “Baa2” to “Baa3” and our commercial paper ratings from “Prime-2” to “Prime-3” based on weakening appliance industry demand. These rating adjustments may result in higher interest costs if we were to seek additional financing in the capital markets. See Note 5Brazil ("Embraco") was notified of the Notes to the Consolidated Financial Statements for additional information on financing arrangements.OTHER MATTERSGovernment authorities in various jurisdictions are conducting antitrust investigations of the global compressor industry including our compressor business headquarteredby government authorities in Brazil (“Embraco”).various jurisdictions. In 2009,2011, Embraco sales represented approximately 7%8% of our global net sales.In February 2009, competitionU.S.United States, and Europe began to seek documents from us in connection with their investigations. A grand jury subpoena from the U.S. Department of Justice requested documents for the time period from 2003 to 2009. Competition authorities in other jurisdictions have sought similar information.September 2009,connection with these agreements, Embraco has acknowledged violations of antitrust law with respect to the Brazilian competition commission (CADE)sale of compressors at various times from 2004 through 2007 and agreed to terminate the administrative investigation of our compressor business. Under the terms of thepay fines or settlement agreement, Whirlpool affiliatespayments. In connection with these agreements and certain executives located in Brazil acknowledged a violation of Brazilianother Embraco antitrust lawmatters, we have incurred, in the Brazilian compressor market by some Embraco employees. The settlement agreement provides for the affiliatesaggregate, charges of approximately $315 million, including fines, defense costs and other expenses. These charges have been recorded within interest and sundry income (expense). At December 31, 2011, $189 million remains accrued, and installment payments of $172 million, plus interest, remain to make contributions totaling 100 million Brazilian reaisbe made to a Brazilian government fund. The contributions translate to approximately $56 million, all of which was recorded as an expense in 2009. In December 2009, a Brazilian court agreed to the public prosecutor’s request to suspend a related criminal proceeding as to certain employees, including Paulo Periquito, former President, Whirlpool International. The proceeding will be dismissed after three years provided that the individuals comply with certain conditions imposed by the court, such as payment to a government fund, a charitable donation and periodic reporting to authorities. Suspension and dismissal of the proceeding does not involve any admission or finding of wrongdoing. We are cooperating with the ongoing government investigations in other jurisdictions and have taken actions, and will continue to take actions, to minimize our potential exposure.became publiccommenced in February 2009, we haveEmbraco has been named as a defendant in numerous related antitrust lawsuits in various jurisdictions seeking damages in connection with the pricing of compressors from 1996 to 2009. Several other compressor manufacturers who are the subject of the government investigations have also been named as defendants in the litigation. United States federal lawsuits instituted on behalf of purported purchasers and containing class action allegations have been combined in one proceeding in the United States District Court for the Eastern District of Michigan. Lawsuits containing class action allegations are also pending in Canada. Additional lawsuits may be filed by purported purchasers.intendcontinue to work toward resolution of ongoing government investigations in other jurisdictions, to defend the related antitrust lawsuits vigorously.predicted with certainty. An accrual has been establishedpredicted. We establish accruals only for those matters where we have determineddetermine that a loss is probable and the amount of loss can be reasonably estimated. As of December 31, 2009, we have accrued charges of approximately $82 million related to these matters. While it is currently not possible to reasonably estimate the aggregate amount of costs which we may incur in connection with these matters, such costs could have a material adverse effect on theour financial position, liquidity, or results of operationsoperations.Whirlpool.F-19MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND469 millionRESULTS OF OPERATIONS—(CONTINUED) reais (equivalent to Constitution providestax authority to resolve a general basis for recognizingdispute regarding tax credits on the purchase of raw materials used in production (“("IPI tax credit”credits"). Certain raw materials that are exempt or have a zero tax basis in the production process qualify for these IPI tax credits. Based on legal precedent, in 2003 and 2004, we recognized tax credits in an aggregate amount of $26 million adjusted for currency. The Brazilian tax authority subsequently challenged the recording of IPI tax credits. No credits were recognized in 2005 through 2009. In 2009, we entered into an agreement under a special Brazilian government program providing for extended payment terms and reductions in penalties and interest to encourage taxpayers to resolve disputed IPI tax credit amounts. Charges recorded related to this program for the year ended December 31, 2009 include $27 million in tax that was recorded in cost of products sold, $16 million in interest expense and $4 million in penalties recorded in interest and sundry income (expense) in our Consolidated Statements of Income. During the December 2009 quarter, based on newly issued regulations, we settled with the Brazilian tax authority to resolve these and other disputed tax amounts. As a result of this settlement agreement, we recorded an increase in value added taxes owedcharges net of approximately $4tax of $34 million in cost2009. The settlement is in the process of goods sold,being ratified by the Brazilian tax authority.reductionpossible range of loss, if any.interest expense totaling $18 millionfederal and state courts related to interest abatement,the manufacturing and sale of our products and alleging claims which include breach of contract, breach of warranty, product defect, fraud, violation of federal and state consumer protection acts and negligence. We are also involved in various other legal actions arising in the normal course of business. We dispute the merits of these suits and actions, and intend to vigorously defend them. Management believes, based upon its current knowledge, after taking into consideration legal counsel's evaluation of such suits and actions discussed, and after taking into account current litigation reserves, that the outcome of these matters currently pendingreductionmaterial adverse effect, if any, on our Consolidated Financial Statements.interestresponse to our antidumping and sundry income (expense)countervailing duty petitions against bottom-mount refrigerators from South Korea and an antidumping petition against the same product from Mexico. The purpose of $4 million relatedthese petitions is to penalty abatementestablish conditions of fair competition in the U.S. market that will support significant investment and related income tax expenseinnovation in the production of $5 million underhigh-end refrigerators in the United States and the U.S. jobs created by that production. The Whirlpool products affected by this special program.In 1989,case are made in Amana, Iowa, where Whirlpool employs approximately 2,000 people. The U.S. International Trade Commission made a Brazilian affiliate (nowunanimous preliminary determination that imports from South Korea and Mexico caused material injury to the domestic industry. The U.S. Department of Commerce issued a subsidiary) brought an actionpreliminary determination that certain respondents violated U.S and international trade laws by dumping bottom-mount refrigerators in the United States. Based on the information submitted by the respondents, the U.S. Department of Commerce made a preliminary determination that no countervailable duties are being provided by the South Korean government, but subsequently modified the preliminary determination by finding certain countervailable duties against a financial institution in Brazil seeking a “Declaration of Non-Enforceability of Obligations” relating to loan documentation entered into without authority by a senior officerparticular respondent. Final decisions on these matters, following completion of the affiliate. In September 2000, an adverse decisioninvestigations, including audits of the respondents' books and records, are currently expected in the declaratory action became final. first half of 2012.2001,December 2011, we submitted petitions requesting that the financial institution began a collection action and we responded with a counterclaim. The lower court dismissed the counterclaim in 2002U.S. Department of Commerce and the Superior Court confirmedU.S. International Trade Commission initiate antidumping and countervailing duty investigations against large residential washers from South Korea, and an antidumping investigation against the lower court decision in December 2005.same products from Mexico. The Superior Court dismissed our counterclaim in 2007. In late 2008, the lower court issued a decisionpurpose of these petitions is to establish conditions of fair competition in the collection actionU.S. market that will support significant investment and innovation in favorthe production of large residential washers in the United States and the U.S. jobs created by that production. The Whirlpool products affected by this case are made in Clyde, Ohio, where Whirlpool employs approximately 3,500 people. The U.S. International Trade Commission made a preliminary determination that imports from South Korea and Mexico caused material injury to the domestic industry. Final decisions on these matters, following completion of the financial institutioninvestigations, including audits of the respondents' books and records are currently expected in the amountfirst half of 283 million Brazilian reais (approximately $162 million), plus judicial adjustments, which could be significant. We have appealed this decision. Based on our outside counsel’s assessment of the case, we increased the amount previously accrued for our estimated exposure for this litigation by 80 million Brazilian reais (approximately $46 million) in the December 2009 quarter. However, the amount of the final award, if any, may be materially different than the amount we have accrued.Management’sManagement's Discussion and Analysis, and other written and oral statements made from time to time by us or on our behalf do not relate strictly to historical or current facts and may contain forward-looking statements that reflect our current views with respect to future events and financial performance. 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,“may,” “believe,“could,” “will,” “should,” “possible,” “plan,” “predict,” “forecast,” “potential,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,“believe,” “could,“may impact,” “possible,” “plan,” “project,” “will,” “forecast,“on track,” and similar words or expressions. Our forward-looking statements generally relate to our 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.Whirlpool’sWhirlpool's forward-lookingF-20MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS—(CONTINUED)(2) the effects(4) inventory and other asset risk; (5) global, political and/or economic uncertainty and disruptions, especially in Whirlpool's significant geographic regions, including uncertainty and disruptions arising from natural disasters or terrorist attacks; (6) impact of the global economic crisis on our customers, suppliers and the availability of credit; (3) Whirlpool’s ability to continue its relationship with significant trade customers and the ability of these trade customers to maintain or increase market share; (4) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers; (5) the ability of Whirlpool to manage foreign currency fluctuations; (6) product liability and product recall costs;debt crisis; (7) litigation and legal compliance risk; (8) the ability of Whirlpool to achieve its business plans, productivity improvements, cost control, price increases, leveraging of its global operating platform, and acceleration of the rate of innovation; (9) inventory and other asset risk; (10)(8) fluctuations in the cost of key materials (including steel, oil, plastic, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (9) litigation and legal compliance risk and costs, especially costs which may be materially different from the amount we expect to incur or have accrued for; (10) product liability and product recall costs; (11) the effects and costs of governmental investigations or related actions by third parties; (12) Whirlpool's ability(12)(14) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and post retirement benefit plans; (13) Whirlpool’s ability to obtain and protect intellectual property rights; (14)(15) information technology system failures and data security breaches; (15) global, political and/or economic uncertainty and disruptions, especially in Whirlpool’s significant geographic regions, including uncertainty and disruptions arising from natural disasters or terrorist attacks; (16) the effects of governmental investigations or related actions by third parties; (17) the impact of labor relations; (18)(17) our ability to attract, develop and retain executives and other qualified employees; (19)(18) changes in the legal and regulatory environment including environmental and health and safety regulations.report.F-21 2009 2008 2007 $ 17,099 $ 18,907 $ 19,408 14,713 16,383 16,517 1,544 1,798 1,736 28 28 31 126 149 61 688 549 1,063 (175 ) (100 ) (63 ) (219 ) (203 ) (203 ) — — 7 294 246 804 (61 ) (201 ) 117 355 447 687 (1 ) — (18 ) 354 447 669 — — (7 ) 354 447 662 (26 ) (29 ) (22 ) $ 328 $ 418 $ 640 $ 4.39 $ 5.57 $ 8.24 — — (0.09 ) $ 4.39 $ 5.57 $ 8.15 $ 4.34 $ 5.50 $ 8.10 — — (0.09 ) $ 4.34 $ 5.50 $ 8.01 $ 1.72 $ 1.72 $ 1.72 74.6 75.1 78.5 75.6 76.0 79.9 2011 2010 2009 Net sales $ 18,666 $ 18,366 $ 17,099 Expenses Cost of products sold 16,089 15,652 14,713 Gross margin 2,577 2,714 2,386 Selling, general and administrative 1,621 1,604 1,544 Intangible amortization 28 28 28 Restructuring costs 136 74 126 Operating profit 792 1,008 688 Other income (expense) Interest and sundry income (expense) (607 ) (197 ) (176 ) Interest expense (213 ) (225 ) (219 ) Earnings (loss) before income taxes (28 ) 586 293 Income tax benefit (436 ) (64 ) (61 ) Net earnings 408 650 354 Less: Net earnings available to noncontrolling interests 18 31 26 Net earnings available to Whirlpool $ 390 $ 619 $ 328 Per share of common stock Basic net earnings available to Whirlpool $ 5.07 $ 8.12 $ 4.39 Diluted net earnings available to Whirlpool $ 4.99 $ 7.97 $ 4.34 Dividends $ 1.93 $ 1.72 $ 1.72 Weighted-average shares outstanding (in millions) Basic 76.8 76.2 74.6 Diluted 78.1 77.6 75.6 F-22per share data) December 31,
2009 December 31,
2008 $ 1,380 $ 146 2,500 2,103 2,197 2,591 99 110 295 580 554 514 7,025 6,044 1,729 1,728 1,796 1,821 1,427 954 4,952 4,503 77 74 1,207 1,186 8,193 7,549 (6,360 ) (5,824 ) 3,117 2,985 $ 15,094 $ 13,532 $ 3,308 $ 2,805 632 530 475 440 501 306 23 393 378 202 624 887 5,941 5,563 2,502 2,002 1,557 1,505 693 822 641 567 5,393 4,896 105 104 2,067 2,033 4,193 3,993 (868 ) (1,259 ) (1,833 ) (1,865 ) 3,664 3,006 96 67 3,760 3,073 $ 15,094 $ 13,532 2011 2010 Assets Current assets Cash and equivalents $ 1,109 $ 1,368 Accounts receivable, net of allowance of $61 and $66, respectively 2,105 2,278 Inventories 2,354 2,792 Deferred income taxes 248 204 Prepaid and other current assets 606 673 Total current assets 6,422 7,315 Property, net of accumulated depreciation of $6,146 and $6,660, respectively 3,102 3,134 Goodwill 1,727 1,731 Other intangibles, net of accumulated amortization of $177 and $146, respectively 1,757 1,789 Deferred income taxes 1,893 1,305 Other noncurrent assets 280 310 Total assets $ 15,181 $ 15,584 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 3,512 $ 3,660 Accrued expenses 951 671 Accrued advertising and promotions 429 426 Employee compensation 365 467 Notes payable 1 2 Current maturities of long-term debt 361 312 Other current liabilities 678 611 Total current liabilities 6,297 6,149 Noncurrent liabilities Long-term debt 2,129 2,195 Pension benefits 1,487 1,519 Postretirement benefits 430 610 Other noncurrent liabilities 558 791 Total noncurrent liabilities 4,604 5,115 Stockholders’ equity Common stock, $1 par value, 250 million shares authorized, 106 million shares issued and 76 million shares outstanding 106 106 Additional paid-in capital 2,201 2,156 Retained earnings 4,922 4,680 Accumulated other comprehensive loss (1,226 ) (893 ) Treasury stock, 30 million shares (1,822 ) (1,823 ) Total Whirlpool stockholders’ equity 4,181 4,226 Noncontrolling interests 99 94 Total stockholders’ equity 4,280 4,320 Total liabilities and stockholders’ equity $ 15,181 $ 15,584 F-23ended Ended December 31, 2009 2008 2007 $ 354 $ 447 $ 662 — — 7 354 447 669 525 597 593 (92 ) — — (4 ) (60 ) (65 ) — — (7 ) (41 ) 42 9 1 — 18 (286 ) 300 181 578 (174 ) (194 ) 326 (250 ) 105 (14 ) 33 (82 ) (112 ) (256 ) 10 (84 ) (123 ) (70 ) 213 (84 ) (24 ) 186 (145 ) (216 ) 1,550 327 927 (541 ) (547 ) (536 ) 77 119 130 — — 100 (35 ) (5 ) (25 ) (499 ) (433 ) (331 ) 872 545 3 (362 ) 101 (243 ) (210 ) (131 ) (17 ) (128 ) (128 ) (134 ) 21 21 68 — (247 ) (368 ) (49 ) (20 ) (5 ) 144 141 (696 ) — — 6 39 (90 ) 33 1,234 (55 ) (61 ) 146 201 262 $ 1,380 $ 146 $ 201 $ 209 $ 200 $ 204 51 76 39 2011 2010 2009 Operating activities Net earnings $ 408 $ 650 $ 354 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 558 555 525 Curtailment gain (35 ) (62 ) (92 ) Increase (decrease) in LIFO inventory reserve 54 4 (41 ) Brazilian collection dispute 144 63 46 Changes in assets and liabilities: Accounts receivable (15 ) 187 (286 ) Inventories 283 (595 ) 578 Accounts payable 25 341 326 Accrued advertising and promotions 14 (47 ) 21 Product recall (15 ) 13 (37 ) Taxes deferred and payable, net (573 ) (94 ) (112 ) Accrued pension (280 ) (16 ) (84 ) Employee compensation (59 ) (6 ) 213 Other 21 85 139 Cash provided by operating activities 530 1,078 1,550 Investing activities Capital expenditures (608 ) (593 ) (541 ) Proceeds from sale of assets 23 17 77 Investment in related businesses (7 ) (18 ) (35 ) Proceeds from sale of brand — 15 — Acquisition of brand — (27 ) — Other (4 ) — — Cash used in investing activities (596 ) (606 ) (499 ) Financing activities Repayments of long-term debt (313 ) (379 ) (210 ) Common stock issued 14 72 21 Dividends paid (148 ) (132 ) (128 ) Purchase of noncontrolling interest shares — (12 ) — Net repayments from short-term borrowings (2 ) (20 ) (362 ) Proceeds from borrowings of long-term debt 300 2 872 Other (17 ) (26 ) (49 ) Cash (used in) provided by financing activities (166 ) (495 ) 144 Effect of exchange rate changes on cash and equivalents (27 ) 11 39 (Decrease) increase in cash and equivalents (259 ) (12 ) 1,234 Cash and equivalents at beginning of year 1,368 1,380 146 Cash and equivalents at end of year $ 1,109 $ 1,368 $ 1,380 Supplemental disclosure of cash flow information Cash paid for interest $ 208 $ 218 $ 209 Cash paid for income taxes $ 136 $ 31 $ 51 F-24 Total Whirlpool Common Stockholders Non-
Controlling
Interests Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock/
Additional Paid-
in-Capital Common Stock $ 3,331 $ 3,205 $ (643 ) $ 619 $ 102 $ 48 662 640 — — — 22
(See Note 8) 385 — 373 — — 12 1,047
(formerly FIN 48) (8 ) (8 ) — — — — (368 ) — — (368 ) — — 130 — — 124 1 5 (152 ) (134 ) — — — (18 ) 3,980 3,703 (270 ) 375 103 69 447 418 — — — 29
(See Note 8) (1,003 ) — (989 ) — — (14 ) (556 ) (247 ) — — (247 ) — — 41 — — 40 1 — (145 ) (128 ) — — — (17 ) 3,073 3,993 (1,259 ) 168 104 67 354 328 — — — 26
(See Note 8) 409 — 391 — — 18 763 67 — — 66 1 — (143 ) (128 ) — — — (15 ) $ 3,760 $ 4,193 $ (868 ) $ 234 $ 105 $ 96 Whirlpool Stockholders’ Equity Total Balances, December 31, 2008 $ 3,073 $ 3,993 $ (1,259 ) $ 168 $ 104 $ 67 Comprehensive income Net earnings 354 328 — — — 26 Other comprehensive income 409 — 391 — — 18 Comprehensive income 763 Stock issued 67 — — 66 1 — Dividends declared (143 ) (128 ) — — — (15 ) Balances, December 31, 2009 3,760 4,193 (868 ) 234 105 96 Comprehensive income Net earnings 650 619 — — — 31 Other comprehensive income (loss) (22 ) — (25 ) — — 3 Comprehensive income 628 Purchase of noncontrolling interest (12 ) — — (3 ) — (9 ) Stock issued 103 — — 102 1 — Dividends declared (159 ) (132 ) — — — (27 ) Balances, December 31, 2010 4,320 4,680 (893 ) 333 106 94 Comprehensive income Net earnings 408 390 — — — 18 Other comprehensive income (loss) (338 ) — (333 ) — — (5 ) Comprehensive income 70 Stock issued 46 — — 46 — — Dividends declared (156 ) (148 ) — — — (8 ) Balances, December 31, 2011 $ 4,280 $ 4,922 $ (1,226 ) $ 379 $ 106 $ 99 F-25world’sworld's leading manufacturer and marketer of major home appliances. We manufacture appliances in 12 countries under 13 principal brand names in four geographic operating segments and market products in nearly every country around the world.world . Our Consolidated Financial Statements include all majority-owned subsidiaries. All intercompany transactions have been eliminated upon consolidation.have evaluated subsequent events through the date the financial statements were issued and filedreclassified certain prior period amounts in our Consolidated Financial Statements to be consistent with the Securities and Exchange Commission, which was February 17, 2010.withinin our Consolidated Statements of Income.U.S.United States production inventories, which are stated at last-in, first-out (“LIFO”) cost, and BrazilLatin America and Asia inventories, which are stated at average cost. Costs do not exceed net realizable values. See Note 4 for additional information about inventories.F-26Millions of dollars 2011 2010 Land $ 76 $ 74 n/a Buildings 1,208 1,218 25 to 50 years Machinery and equipment 7,964 8,502 3 to 25 years Accumulated depreciation (6,146 ) (6,660 ) Property, net $ 3,102 $ 3,134 STATEMENTS—STATEMENTS - (CONTINUED)Goodwill and indefinite lived intangible assets are required to be evaluated for impairment on an annual basis (or whenever events occur which may indicate possible impairment). value, as determined by its discounted cash flows.value. If the book value of a reporting unit exceeds its fair value, we perform the second step of the impairment test to determine the amount of goodwill impairment loss to be recorded.test. In the second step, we determineestimate an implied fair value of the reporting unit’s goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill (including any unrecognized intangible assets). The difference between the total fair value of the reporting unit and the fair value of all the assets and liabilities other than goodwill is the implied fair value of that goodwill. The amount of impairment loss is equal to the excess of the book value of the goodwill over the implied fair value of that goodwill.63 to 18 years. See Note 2 for additional information about goodwill and intangible assets.a payables presentment and settlement service (PPS) provided by a third party processor. This service allows our suppliers to view scheduled Whirlpool payments online, enabling them to better manage their cash flow and reduce payment processing costs.payables processors. Independent of Whirlpool, the PPS provider also allowsprocessors allow suppliers to sell their receivables to financial institutions at the sole discretion of both the supplier and the financial institution. We have no economic interest in the sale of these receivables and no direct financial relationship with the financial institutions concerning this service.these services. All of our obligations, including amounts due, remain to our suppliers as stated in our supplier agreements. As of December 31, 20092011 and 2008,2010, approximately $246$952 million and $119$916 million, respectively, of our total accounts payable is available for this purpose and approximately $145 million and $72 million, respectively, hashave been sold by suppliers to participating financial institutions.Research and Development CostsResearch and development costs are charged to expense as incurred and totaled $455 million, $436 million and $421 million in 2009, 2008 and 2007, respectively.Advertising CostsAdvertising costs are charged to expense when the advertisement is first communicated and totaled $211 million, $336 million and $321 million in 2009, 2008 and 2007, respectively.Discontinued OperationsWe present the results of operations, financial position and cash flows of operations that have either been sold or that meet the “held for sale accounting” and certain other criteria as discontinued operations.F-27NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)Foreign Currency TranslationThe functional currency for our international subsidiaries and affiliates is typically the local currency. Certain international subsidiaries primarily utilize the U.S. dollar and Euro as the functional currency.Long-Lived AssetsProperty, plant and equipment are stated at cost. During the March 2009 quarter, we changed our method of depreciation prospectively for substantially all long-lived production machinery and equipment to a modified units of production depreciation method. Under this method, we record depreciation based on units produced, unless units produced drop below a minimum threshold at which point depreciation is recorded using the straight-line method. Prior to 2009, all machinery and equipment was depreciated using the straight-line method. We believe depreciating machinery and equipment based on units of production is a preferable method as it best matches the usage of assets with the revenues derived from those assets. For nonproduction long-lived assets, we depreciate costs based on the straight-line method. Depreciation expense for property, plant and equipment was $497 million, $569 million and $562 million in 2009, 2008 and 2007, respectively.The estimated useful lives for major asset classifications are as follows:Asset ClassificationEstimatedUseful LifeBuildings25 to 50 yearsMachinery and equipment4 to 23 yearsComputer/Software1 to 8 yearsAs a result of this change in method, and lower overall production levels in 2009, depreciation expense decreased by $83 million from what would have been recorded using the straight-line method. Net of amounts capitalized into ending inventories and income taxes, net earnings increased $48 million for 2009, or $.64 per diluted share.We classify gains and losses associated with asset dispositions in the same line item as the underlying depreciation of the disposed asset in the Consolidated Statements of Income. Net gains and losses recognized in cost of products sold include a loss of $3 million for 2009 and gains of $16 million and $51 million for 2008, and 2007, respectively. Net gains recognized in selling, general and administrative expenses include $1 million, $19 million and $14 million for 2009, 2008 and 2007, respectively.We record impairment losses on long-lived assets when events and circumstances indicate the assets may be impaired and the estimated future cash flows generated by those assets are less than their carrying amounts. We fair value these derivative instruments periodically. Changes in the fair value of derivative assets or liabilities (i.e., gains or losses) are recognized depending upon the type of hedging relationship and whether a hedge has been designated. For those derivative instruments that qualify for hedge accounting, we designate the hedging instrument, based upon the exposure being hedged, as a cash flow hedge, fair value hedge, or a hedge of a net investment in a foreign operation. For a derivative instrument designated as a fair value hedge, the gain or loss on the derivative is recognized in earnings in the period of change in fair value together with the offsetting gain or loss on the hedged item. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of Other Comprehensive Income and is subsequently recognized in earnings when the hedged exposure affects earnings. For a derivative instrument designated as a hedge of a net investment in a foreign operation, the effective portion of the derivative’s gain or loss is reported in Other Comprehensive Income as part of the cumulative translation adjustment. Changes in fair value of derivative instrumentsF-28STATEMENTS—STATEMENTS - (CONTINUED)In accountingdetermined based onrecognized for the differencefuture tax consequences of temporary differences between the financial statement and tax basisbases of the respective assets and liabilities using enacted rates. The effect of a change in tax rates on deferred tax assets is recognized in effect forincome in the year thatperiod of enactment date.differences are expected to reverse. Judgment is required in determining and evaluating ourConsolidated Balance Sheet, effects of an uncertain income tax provisions. We recognize the tax benefit from an uncertain tax position only ifwhen it is more likely than not, based on technical merits, that the tax position will be sustained on examination byupon examination. We accrue for other tax contingencies when it is probable that a liability to a taxing authorities, based onauthority has been incurred and the technical meritsamount of the position. We evaluatecontingency can be reasonably estimated.adjust these accruals in light of changing facts and circumstances. Forrelated companies to the extent that such earnings are not deemed to be permanently invested. See Note 11 for additional information about income taxes, see Note 11.Ourprogram.program (BEFIEX). These credits reduce Brazilian federal excise taxes on domestic sales, resulting in an increase in the operations’ recorded net sales. Based on a recalculation of available credits andAfter a favorable court decision in the fourth quarter of 2005, upheld by a December 2011 appellate court decision, we were able to recognize approximately $69$266 million $168, $225 million, and $131$69 million of export credits during 2011, 2010 and 2009, 2008 and 2007, respectively. As of December 31, 2009, approximately $693 million of exportExport credits remain.recognized are not subject to income taxes. We recognize export credits as they are monetized; however, future actions by the Brazilian government could limit our ability to monetize these export credits. See Note 11 for additional information about how these credits impact our effective tax rateAs of December 31, 2011, approximately $238 million of future cash monetization remained, including $60 million of related court awarded fees, which will be payable in subsequent years. A Brazilian law change to the inflation index tables reduced available cash monetization by $62 million in 2011.included in “Foreign government tax incentive”generally established in the rate reconciliationsame period that revenue from the sale of the related products is recognized. The amounts of those reserves are based on established terms and our effective tax rate.ReclassificationsWe reclassified certain prior periodbest estimate of the amounts in our Consolidated Financial Statementsnecessary to be consistent with current period presentation. The effectsettle future and existing claims on products sold as of these reclassifications is not material.Newthe balance sheet date.StandardsJune 2009,September 2011, the Financial Accounting Standards Board (“FASB”("FASB") issuedamended Accounting Standards Codification (“ASC”("ASC") 105, “Generally Accepted Accounting Principles” (formerly Statement350, "Intangibles-Goodwill and Other". Under the amendment, an entity may assess qualitative factors to determine whether it is more likely than not that the fair value of Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards Codificationa reporting unit is less than its carrying amount, including goodwill. If determined to be necessary, the two-step impairment test shall be used to identify potential goodwill impairment and measure the Hierarchyamount of Generally Accepted Accounting Principles”). ASC 105 establishes the FASB ASC as the single source of authoritative nongovernmental U.S. GAAP.a goodwill impairment loss to be recognized, if any. The standardamendment is effective for annual and interim and annual periods endinggoodwill impairment tests performed for fiscal years beginning after SeptemberDecember 15, 2009.2011. We adopted the provisions of the standardthis amendment on September 30, 2009,January 1, 2012 which did not have a material impact on our consolidated financial statements.In June 2009, the FASB issued accounting guidance contained within ASC 810, “Consolidation”, regarding the consolidation of variable interest entities (formerly SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”). ASC 810 is intended to improve financial reporting by providing additional guidance to companiesF-29STATEMENTS—STATEMENTS - (CONTINUED)involved with variable interest entitiesby requiring additional disclosures about a company’s involvementother comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in variable interest entities. This standardstockholders' equity. The amended guidance, which must be applied retroactively, is effective for interim and annual periods endingbeginning after NovemberDecember 15, 2009. 2011, with earlier adoption permitted. In addition, in December 2011, the FASB issued an amendment to this accounting standard which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement.We adopted the provisions of the standardthis amendment on January 1, 2010,2012 which did not have a material impact on our consolidated financial statements.June 2009,May 2011, the FASB issuedamended ASC 860, “Transfers820, "Fair Value Measurement." This amendment is intended to result in convergence between U.S. GAAP and Servicing” (formerly SFAS No. 166, “Accounting for Transfers ofInternational Financial Assets”Reporting Standards (“IFRS”). ASC 860 requires more information about transfers of financial assets and where companies have continuing exposure to the risk related to transferred financial assets. It eliminates the concept of a qualifying special purpose entity, changes the requirements for derecognizing financial assets,measurement of and requires additional disclosure.disclosures about fair value. This standardguidance clarifies the application of existing fair value measurements and disclosures, and changes certain principles or requirements for fair value measurements and disclosures. The amendment is effective for interim and annual periods endingbeginning after NovemberDecember 15, 2009.2011. We adopted the provisions of the standardthis amendment on January 1, 2010,2012 which did not have a material impact on our financial statements.In April 2009, the FASB issued ASC 825, “Financial Instruments” (formerly FASB Staff Position 107-1, “Interim Disclosures about Fair Value of Financial Instruments”). ASC 825 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies, as well as in annual financial statements. This standard also requires those disclosures in summarized financial information at interim reporting periods ending after June 15, 2009. We adopted the provisions of ASC 825 on June 30, 2009. See Notes 3 and 5 for information related to the fair value of our financial instruments.In March 2008, the FASB issued the disclosure requirements within ASC 815, “Derivatives and Hedging” (formerly SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB No. 133”). ASC 815 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. The disclosure requirements apply to all derivative instruments within the scope of ASC 815. The standard also applies to non-derivative hedging instruments and all hedged items designated and qualifying under ASC 815. We adopted the disclosure requirements of ASC 815 on January 1, 2009. For additional information regarding derivative instruments and hedging activities, see Note 7.In December 2007, the FASB issued accounting guidance contained within ASC 805, “Business Combinations” (formerly SFAS No. 141(R), “Business Combinations”). ASC 805 requires us to continue to follow the guidance in SFAS 141 for certain aspects of business combinations, with additional guidance provided defining the acquirer, the accounting for transaction costs and contingent consideration, recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, assets and liabilities arising from contingencies, defining a bargain purchase and recognizing and measuring goodwill or a gain from a bargain purchase. In addition, adjustments associated with changes in tax contingencies that occur after the measurement period, not to exceed one year, are recorded as adjustments to income. This statement was effective for all business combinations for which the acquisition date is on or after the beginning of an entity’s first fiscal year that begins after December 15, 2008; however, the guidance in this standard regarding the treatment of income tax contingencies is retrospective to business combinations completed prior to January 1, 2009. We adopted ASC 805 on January 1, 2009.In December 2007, the FASB issued accounting guidance contained within ASC 810, “Consolidation”, regarding noncontrolling interests (formerly SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”). ASC 810-10-65 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We adopted ASC 810-10-65 on January 1, 2009. As a result, we have reclassified financial statement line items within our Consolidated Balance Sheets and Statements of Income for the prior period to conform with this standard. Additionally, see Note 8 for disclosure reflecting the impact of ASC 810-10-65 on our reconciliation of comprehensive income and stockholders’ equity.F-30NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)GoodwillGoodwillWe evaluated our goodwill and indefinite lived intangibles are subjecttrademarks for impairment as of November 30, 2011. Based on the results of our test, no impairment of goodwill or our trademarks was determined to an annual impairment analysis performed during the fourth quarter of each year, by reporting unit. We determine the fair value of each reporting unit using discounted cash flows. Our reporting units include: North America, Europe, Multibras and Embraco (which combined is our Latin America reportable operating segment) and Asia. We performed the annual impairment tests and determined there is no impairment for any period presented.goodwill: December 31, 2009 2008 $ 1,724 $ 1,724 5 4 $ 1,729 $ 1,728 Millions of dollars Total December 31, 2009 $ 1,724 $ 5 $ 1,729 Revision of estimated Maytag operations exit costs (1 ) — (1 ) Foreign currency translation 4 (1 ) 3 December 31, 2010 1,727 4 1,731 Revision of estimated Maytag operations exit costs (2 ) — (2 ) Foreign currency translation (2 ) — (2 ) December 31, 2011 $ 1,723 $ 4 $ 1,727 2011 2010 Millions of dollars Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Intangible assets with finite lives: $ 353 $ (159 ) $ 194 $ 341 $ (131 ) $ 210 55 (18 ) 37 59 (15 ) 44 Total other intangible assets, finite lives $ 408 $ (177 ) $ 231 $ 400 $ (146 ) $ 254 Trademarks, indefinite lives 1,526 — 1,526 1,535 — 1,535 Total other intangible assets $ 1,934 $ (177 ) $ 1,757 $ 1,935 $ (146 ) $ 1,789 net carrying value of intangible assetsfuture estimated amortization expense by operating segment (North America (“NAR”), Latin America (“LAR”) and Europe (“WER”)), as follows: NAR LAR WER Total Estimated
Useful Life 2009 2008 2009 2008 2009 2008 2009 2008 $ 1,478 $ 1,478 $ — $ — $ 34 $ 34 $ 1,512 $ 1,512 Indefinite life 226 242 — — — — 226 242 18 years 42 53 6 5 10 9 58 67 6 to 10 years $ 1,746 $ 1,773 $ 6 $ 5 $ 44 $ 43 $ 1,796 $ 1,821 Amortization expense is estimated to be $28 million for each of the years 2010-2012, $20 million for 2013 and $16 million for 2014.Millions of dollars 2012 $ 33 2013 31 2014 21 2015 18 2016 16 three-tierthree-tiered fair value hierarchy is established, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets that are observable, either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.are based on oneusing the market approach valuation technique. This technique uses prices and other relevant information generated by market transactions involving identical or more of three valuation techniques. The three valuation techniques are identified in the table below and are as follows:(a)Market approach—prices and other relevant information generated by market transactions involving identical or comparable assets or liabilitiesF-31NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)(b)Cost approach—amount that would be required to replace the service capacity of an asset (replacement cost)(c)Income approach—techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models) Total Quoted Prices In
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3) Valuation
Technique $ 355 $ 355 $ — $ — (a ) 97 — 97 — (a ) 25 25 — — (a ) $ (234 ) $ — $ (234 ) $ — (a ) 17 17 — — (a ) Total Cost Basis Total Fair Value Millions of dollars 2011 2010 2011 2010 2011 2010 2011 2010 $ 340 $ 414 $ 340 $ 414 $ — $ — $ 340 $ 414 Net derivative contracts — — — — (57 ) 125 (57 ) 125 Available for sale investments 21 27 15 25 — — 15 25 (1)(1) Money market funds are primarily comprised of U.S.United States government obligations.During 2008, we recorded an impairment charge of $9 million inEurope segment associated with an available for sale investment. The impairment charge was recorded in interest and sundry income (expense) in our Consolidated Statements of Income for the year ended inventory at December 31, 2008.(4) INVENTORIES 2009 2008 $ 1,853 $ 2,213 50 49 439 515 2,342 2,777 (145 ) (186 ) $ 2,197 $ 2,591 The decrease in inventories in 2009 compared to 2008 is driven primarily by increased demand in our Latin America region due to favorable economic conditions in Brazil, the Impostos sobre Produtos sales tax holiday declared by the Brazilian government for the second half of 2009 and decreases in production levels in our North America and Europe regions.Millions of dollars 2011 2010 Finished products $ 2,016 $ 2,314 Work in process 41 37 Raw materials 500 590 2,557 2,941 Less: excess of FIFO cost over LIFO cost (203 ) (149 ) Total inventories $ 2,354 $ 2,792 represent approximately 40%represented 41% and 43% of total inventories at December 31, 20092011 and 2008,2010, respectively. Throughout 2009, we decreased our excess of FIFO cost over LIFO cost reserve due to the impact of lower materials costs during 2009 and decrements in LIFO layers totaling approximately $2 million.F-32STATEMENTS—STATEMENTS - (CONTINUED)Debt20092011 and 2008: 2009 2008 $ — $ 200 325 325 300 300 350 — 499 499 102 102 500 — 192 190 249 249 244 243 119 96 2,880 2,204 378 202 $ 2,502 $ 2,002 Millions of dollars 2011 2010 Senior note—6.125%, maturing 2011 $ — $ 300 Senior note—8.0%, maturing 2012 350 350 Medium-term note—5.5%, maturing 2013 500 500 Maytag medium-term note—6.5% maturing 2014 101 101 Senior note—8.6%, maturing 2014 500 500 Maytag medium-term note—5.0% maturing 2015 195 193 Senior note—6.5%, maturing 2016 249 249 Debentures—7.75%, maturing 2016 244 244 Senior note—4.85%, maturing 2021 300 — Other (various maturing through 2019) 51 70 2,490 2,507 Less current maturities 361 312 Total long-term debt, net of current maturities $ 2,129 $ 2,195 2009: $ 378 312 361 511 611 707 $ 2,880 Millions of dollars 2012 $ 361 2013 511 2014 610 2015 204 2016 502 Thereafter 302 Total long-term debt, including current maturities $ 2,490 May 4, 2009,June 7, 2011, we completed a debt offering comprised of (1) $350$300 million aggregate principal amount of 8.000%4.85% notes due May 1, 2012 and (2) $500 million aggregate principal amount of 8.600% notes due May 1, 2014.June 15, 2021 (the “2021 Notes”). The proceeds from the notes2021 Notes were used for general corporate purposes. If we experience a downgrade in our credit ratings, theto repay $300 million of 6.125% notes are subject to an increase in the interest rate, resulting in higher interest payments.that matured on June 15, 2011. The notes2021 Notes contain customary covenants that limit our ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes2021 Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The notes2021 Notes are registered under the Securities Act of 1933, as amended, pursuant to our Registration Statement on Form S-3 (File No. 333-157392) filed with the Securities and Exchange Commission on February 19, 2009.FebruaryJune 28, 20082011, we completed the issuance of $500 million 5.50% notes due March 1, 2013.entered into an Amended and Restated Long-Term Credit Agreement (the “Facility”). The notes were issued under an existing shelf registration statement filed with the SecuritiesFacility amended, restated, and Exchange Commission. We pay interest semiannuallyextended our previous credit facility, that was scheduled to mature on March 1 and September 1. The notes contain a provision which requires Whirlpool to make an offer to purchase the notes at a purchase price equal to 101% of the principal amount plus any accrued and unpaid interest if certain change of control events occur. The notes are also subject to customary non-financial covenants.F-33NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)During 2009, we have incurred and paid a total of $5.3 million in debt financing related fees. These amounts have been capitalized and are being amortized over the term of the respective agreements.We are in compliance with debt covenant requirements at December 31, 2009.The fair value of long-term debt (including current maturities) at December 31, 2009 and 2008 was $3,060 million and $2,037 million, respectively, and was estimated using discounted cash flow analysis based on incremental borrowing rates for similar types of borrowing arrangements.Notes PayableNotes payable consist of short-term borrowings payable to banks. The fair value of our notes payable approximates the carrying amount due to the short maturity of these obligations. The weighted-average interest rate on notes payable was 4.3% and 3.8% for the years ended December 31, 2009 and 2008, respectively.We have credit facilities which provide $1.35 billion maturing on August 13, 2012. The total commitment increased from $1.35 billion to $1.725 billion and $522 million maturing December 1, 2010, and includethe maturity date was extended to June 28, 2016. The Facility includes a $200 million letter of credit subfacility.sublimit of $200 million. Borrowings under the credit facilitiesFacility are available to us and our designated subsidiaries for general corporate purposes, including commercial paper support. Subsidiary borrowings under these facilities,the Facility, if any, are guaranteed by us.Whirlpool Corporation. Interest under the credit facilitiesFacility accrues at a variable annual rate based on LIBOR plus a margin or the prime rate plus a margin. The margin is dependent on our credit rating at that time. The credit facilities require us to meet certain leverage and interest coverage requirements. At December 31, 20092011, the margin was as follows: (1) 1.625% over LIBOR; (2) 0.625% over the prime rate; and 2008,(3) the unused commitment fee was 0.25%. At December 31, 2011 and 2010 we had no borrowings of $0 and $247 million, respectively, were outstanding under these credit agreements and are included within notes payable in our Consolidated Balance Sheets. either facilities. We arewere in compliance with financial covenant requirements at December 31, 20092011 and 2008.On February 27, 2009, we entered into an amendment (the “First Amendment”) to the Amended and Restated Long-Term Five-Year Credit Agreement (the “Credit Agreement”), dated as of December 1, 2005, by and among Whirlpool Corporation, certain other borrowers, the lenders referred to therein, Citibank N.A., as administrative agent and fronting agent, JPMorgan Chase Bank, N.A., as syndication agent, and ABN Amro Bank N.V., Royal Bank of Scotland and Bank of America, as documentation agents.The First Amendment amends our $2.2 billion Credit Agreement to (1) increase our maximum Leverage Ratio (as defined in the Credit Agreement) to 3.5 to 1.0 for each fiscal quarter ended on or prior to December 31, 2009, reverting to 3.0 to 1.0 for each fiscal quarter ended thereafter; (2) reduce our minimum Interest Coverage Ratio (as defined in the Credit Agreement) to 1.5 to 1.0 for each fiscal quarter ended on or prior to December 31, 2009, reverting to 2.0 to 1.0 for each fiscal quarter ended thereafter; (3) limit the value of the assets subject to non-permitted liens to an amount equal to $200 million and permit liens on assets located outside of the United States arising by operation of law; (4) exclude an amount of non-recurring cash restructuring charges of up to $100 million on a rolling 12 month basis for the purposes of calculating “Consolidated EBIT” and “Consolidated EBITDA” under the Credit Agreement; (5) for purposes of calculating the “Leverage Ratio,” provide for a $200 million exclusion from the definition of “Indebtedness” for net assets or liabilities with respect to hedging contracts; (6) increase the spread over LIBOR to 3%, the spread over prime to 2%, and the utilization fee to be paid, if amounts borrowed exceed $1.1 billion, to 1% as of the date of the First Amendment; and (7) replace the facility fee with an unused commitment fee of 0.50%, as of the date of the First Amendment.On August 13, 2009, we entered into a second amendment (the “Second Amendment”) to the Credit Agreement pursuant to which Whirlpool Corporation amended and restated such facility to be an Amended and Restated Long-Term Credit Agreement (the “Amended Credit Agreement”), by and among Whirlpool Corporation, certain other borrowers, the lenders referred to therein, JPMorgan Chase Bank, N.A., as Administrative Agent and Fronting Agent, Citibank, N.A., as Syndication Agent, The Royal Bank of Scotland plc, Fortis Capital Corp. and Bank of America, N.A., as Documentation Agents.F-34STATEMENTS—STATEMENTS - (CONTINUED)Second Amendment divides and reduces the existing credit facility into a $1.35 billion tranche maturing on August 13, 2012 (the “Extending Tranche”) and a $522 million tranche maturing December 1, 2010 (the “Non-Extending Tranche”). The Second Amendment also increases the letter of credit sublimit from $100 million to $200 million. The interest rate margin over LIBOR and the prime rate will be charged based on Whirlpool’s credit rating.For the Extending Tranche, the Second Amendment provides that the utilization fee to be paid, if amounts borrowed exceed 50% of the facility, is 0.50%. For the Non-Extending Tranche, the Second Amendment provides that the utilization fee to be paid, if amounts borrowed exceed 50% of the facility, is 1%. We will incur a commitment fee for any unused portion of the credit facility which is based on Whirlpool’s credit rating.The Second AmendmentFacility requires us to meet certain financial tests. Whirlpool’sWhirlpool's maximum rolling twelve month Leverage Ratio (as defined(defined in the Amended Credit Agreement)Facility) is limited to 3.5quarter ended on or prior to December 31, 2010, and 3.25 to 1.0 for each fiscal quarter ended thereafter.quarter. The rolling twelve month Interest Coverage Ratio (as redefined(defined in the Amended Credit Agreement as EBITDA to Interest Expense)Facility) is required to be greater than or equal to 2.53.0 to 1.0 for each fiscal quarter ended on or prior to December 31, 2010 and 3.0 to 1.0 for each fiscal quarter ended thereafter.During 2009, we have incurred andquarter.a totallenders under the Facility an up-front fee of $32.8approximately $5 million in notes payable financing related fees. These amounts have been capitalized and, which combined with the unamortized deferred fees from the previous credit facility are being amortized over the remaining term of the respective agreements.(6) COMMITMENTS AND CONTINGENCIESGuaranteesWe have guarantee arrangementsIn December 2011 we obtained a committed credit facility in aBrazil. The credit facility provides borrowings up to 700 million Brazilian subsidiary. As a standard business practice in Brazil, the subsidiary guarantees customer linesreais (approximately $373 million as of credit at commercial banks to support purchases following its normal credit policies. If a customer were to default on its line of credit with the bank, our subsidiary would be required to satisfy the obligation with the bank, and the receivable would revert back to the subsidiary. At December 31, 2009 and 2008,2011), with certain restrictions on the guaranteed amounts totaled $309 million and $203 million, respectively. Our only recourse with respect to these arrangements would be legal or administrative collection efforts directed against the customer.We provide guaranteesamount available for each draw. The credit facility contains no financial covenants. As of indebtedness and lines of credit for various consolidated subsidiaries. The maximum amount of credit facilities available under these lines for consolidated subsidiaries totaled $1.4 billion and $1.3 billion at December 31, 20092011 we had no borrowings outstanding under this credit agreement.2008, respectively. Our total outstanding bank indebtedness under guarantees totaled $18 million and $364 million at December 31, 2009 and 2008, respectively.As of May 16, 2008, we guaranteed a $50 million five year revolving credit facility between certain financial institutions and a not-for-profit entity in connection with a community and economic development project (“Harbor Shores”).commercial paper used to fund working capital requirements. The fair value of our notes payable approximates the guarantee is nominal. The purpose of Harbor Shores is to stimulate employment and growth in the areas of Benton Harbor and St. Joseph, Michigan. In the event of default, we must satisfy the guarantee of the credit facility upcarrying amount due to the amount borrowed at the dateshort maturity of default.Warranty ReservesProduct warranty reserves are established in the same period that revenue from the sale of the related products is recognized.these obligations. The amounts of those reserves are basedweighted-average interest rate on established termsnotes payable was our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date.F-35NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)2.50%The following represents a reconciliation of the changes in product warranty reserves for the periods presented: 2009 2008 $ 215 $ 226 396 417 (433 ) (411 ) 11 (17 ) $ 189 $ 215 $ 159 $ 174 30 41 $ 189 $ 215 Product warranty reserves are included within other current liabilities and other noncurrent liabilities in our Consolidated Balance Sheets at December 31, 2009 and 2008.Operating Lease CommitmentsAt December 31, 2009, we had noncancelable operating lease commitments totaling $897 million. The annual future minimum lease payments are summarized by year in the table below: $ 186 159 126 99 79 248 $ 897 Our rent expense was $208 million, $201 million and $183 million for the years ended December 31, 2011 and 2010, respectively. We had no commercial paper outstanding at December 31, 2011 and 2010.2008 and 2007, respectively.Purchase ObligationsOur expected cash outflows resulting from purchase obligations are summarized by yearour compressor business headquartered in the table below: $ 278 296 184 85 46 115 $ 1,004 F-36NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)Legal ContingenciesGovernment authorities in various jurisdictions are conducting antitrustBrazil ("Embraco") was notified of investigations of the global compressor industry including our compressor business headquarteredby government authorities in Brazil (“Embraco”).various jurisdictions. In 2009,2011, Embraco sales represented approximately 7%8% of our global net sales.In February 2009, competitionsalesU.S.United States, and Europe began to seek documents from us in connection with their investigations. A grand jury subpoena from the U.S. Department of Justice requested documents for the time period from 2003 to 2009. Competition authorities in other jurisdictions have sought similar information.September 2009,connection with these agreements, Embraco has acknowledged violations of antitrust law with respect to the Brazilian competition commission (CADE)sale of compressors at various times from 2004 through 2007 and agreed to terminate the administrative investigation of our compressor business. Under the terms of thepay fines or settlement agreement, Whirlpool affiliatespayments. In connection with these agreements and certain executives located in Brazil acknowledged a violation of Brazilianother Embraco antitrust lawmatters, we have incurred, in the Brazilian compressor market by some Embraco employees. The settlement agreement provides for the affiliatesaggregate, charges of approximately make contributions totaling 100 million Brazilian reaisbe made to a Brazilian government fund. The contributions translate to approximately $56 million, all of which was recorded as an expense in 2009. In December 2009, a Brazilian court agreed to the public prosecutor’s request to suspend a related criminal proceeding as to certain employees, including Paulo Periquito, former President, Whirlpool International. The proceeding will be dismissed after three years provided that the individuals comply with certain conditions imposed by the court, such as payment to a government fund, a charitable donation and periodic reporting to authorities. Suspension and dismissal of the proceeding does not involve any admission or finding of wrongdoing. We are cooperating with the ongoing government investigations in other jurisdictions and have taken actions, and will continue to take actions, to minimize our potential exposure.became publiccommenced in February 2009, we haveEmbraco has been named as a defendant in numerous related antitrust lawsuits in various jurisdictions seeking damages in connection with the pricing of compressors from 1996 to 2009. Several other compressor manufacturers who are the subject of the government investigations have also been named as defendants in the litigation. United States federal lawsuits instituted on behalf of purported purchasers and containing class action allegations have been combined in one proceeding in the United States District Court for the Eastern District of Michigan. Lawsuits containing class action allegations are also pending in Canada. Additional lawsuits may be filed by purported purchasers.intendcontinue to work toward resolution of ongoing government investigations in other jurisdictions, to defend the related antitrust lawsuits vigorously.predicted with certainty. An accrual has been establishedpredicted. We establish accruals only for those matters where we have determineddetermine that a loss is probable and the amount of loss can be reasonably estimated. As of December 31, 2009, we have accrued charges of approximately $82 million related to these matters. While it is currently not possible to reasonably estimate the aggregate amount of costs which we may incur in connection with these matters, such costs could have a material adverse effect on theour financial position, liquidity, or results of operationsoperations.Whirlpool.469 million reais (equivalent to $301 million) was made on July 14, 2011, and the second of 490 million reais (equivalent to $275 million) was made during January 2012. At December 31, 2011 the outstanding accrual related to the final installment translated to approximately $261 million. The settlement amount was funded from available cash.Constitution providestax authority to resolve a general basis for recognizingdispute regarding tax credits on the purchase of raw materials used in production (“("IPI tax credit”credits"). Certain raw materials that are exempt or have a zero tax basis in the production process qualify for these IPI tax credits. Based on legal precedent, in 2003 and 2004, we recognized tax credits in an aggregate amount of $26 million adjusted for currency. The Brazilian tax authority subsequently challenged the recording of IPI tax credits. No credits were recognized in 2005 through 2009. In 2009, we entered into an agreement under a special Brazilian government program providing for extended payment terms and reductions in penalties and interest to encourage taxpayers to resolve disputed IPI tax credit amounts. Charges recorded related to this program for the year ended December 31, 2009 include $27 million in tax that was recorded in cost of products sold, $16 million in interest expense and $4 million in penaltiesF-37NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)recorded in interest and sundry income (expense) in our Consolidated Statements of Income. During the December 2009 quarter, based on newly issued regulations, we settled with the Brazilian tax authority to resolve these and other disputed tax amounts. As a result of this settlement agreement, we recorded an increasecharges net of tax of value added taxes owed2009. The settlement is in the process of approximately $4 millionbeing ratified by the Brazilian tax authority.cost of goods sold, a reductionvarious jurisdictions in interest expense totaling $18 million related to interest abatement, a reduction in interestthe United States and sundry income (expense) of $4 million related to penalty abatement and related income tax expense of $5 million under this special program.In 1989, a Brazilian affiliate (now a subsidiary) brought an action against a financial institution in Brazil seeking a “Declaration of Non-Enforceability of Obligations”Canada relating to loan documentation entered intocertain of our front load washing machines. The complaints in these lawsuits generally allege violations of state consumer fraud acts, unjust enrichment, and breach of warranty. The complaints generally seek unspecified compensatory, consequential and punitive damages. We believe these suits are without authority bymerit and intend to vigorously defend them. At this point, the Company cannot reasonably estimate a senior officerpossible range of the affiliate. loss, if any.September 2000, an adverse decision in the declaratory action became final. In 2001, the financial institution began a collection action andaddition, we responded with a counterclaim. The lower court dismissed the counterclaim in 2002 and the Superior Court confirmed the lower court decision in December 2005. The Superior Court dismissed our counterclaim in 2007. In late 2008, the lower court issued a decision in the collection action in favor of the financial institution in the amount of 283 million Brazilian reais (approximately $162 million), plus judicial adjustments, which could be significant. We have appealed this decision. Based on our outside counsel’s assessment of the case, we increased the amount previously accrued for our estimated exposure for this litigation by 80 million Brazilian reais (approximately $46 million) in the December 2009 quarter. However, the amount of the final award, if any, may be materially different than the amount we have accrued.We are currently defending a number of other class action suits in federal and state courts related to the manufacturing and sale of our products and alleging claims which include breach of contract, breach of warranty, product defect, fraud, and violation of federal and state consumer protection acts. Thereacts and negligence. We are no allegations of any personal injury or property damage. However, unspecified compensatory damages are being sought. We believe these suits are without merit. We intend to vigorously defend these actions.We arealso involved in various other legal actions arising in the normal course of business. We dispute the merits of these suits and actions, and intend to vigorously defend them. Management believes, based upon its current knowledge, after taking into consideration legal counsel’scounsel's evaluation of such suits and actions is of the opiniondiscussed, and after taking into account current litigation reserves, that the outcome of these matters willcurrently pending against Whirlpool should not have a material adverse effect, if any, on our Consolidated Financial Statements.RecallsWarranty and Recall Reserves Product Warranty Product Recall Total Millions of dollars 2011 2010 2011 2010 2011 2010 Balance at January 1 $ 202 $ 187 $ 15 $ 2 $ 217 $ 189 Issuances/accruals during the period 344 349 — 78 344 427 Settlements made during the period (355 ) (343 ) (6 ) (65 ) (361 ) (408 ) Other changes — 9 (9 ) — (9 ) 9 Balance at December 31 $ 191 $ 202 $ — $ 15 $ 191 $ 217 Current portion $ 157 $ 159 $ — $ 15 $ 157 $ 174 Non-current portion 34 43 — — 34 43 Total $ 191 $ 202 $ — $ 15 $ 191 $ 217 On March 10, 2009, we announced, in a joint press release issued with the U.S. Product Safety Commission, a voluntary recall of 1.8 million refrigerators sold in the U.S. and Canada between 2001 and 2004. The recall is due to a defect in an electrical relay component purchased from a supplier. The estimate of the affected population is higher by 0.8 million refrigerators than as disclosed in our 2008 Form 10-K due to a determination that the defective part which caused the product recall also resulted in similar failures in another type of refrigerator. There have been no other significant changes in assumptions other than increasing the affected population. As a result, we have accrued $67 million as the estimated cost of this recall. We have recorded $35 million and $32 million, respectively, as a charge to cost of products sold related to this accrual during the years ended December 31, 2009 and 2008. Our actual costs related to this action will depend on several factors, including the number of consumers who respond to the recall, the costs of repair and administration, and whether costs will be recovered from the supplier. Of this accrual, we have approximately $2 million remaining at December 31, 2009.On February 1, 2007, Maytag Corporation announced a voluntary recall of approximately 2.3 millionMaytag andJenn-Air brand dishwashers. We originally estimated the cost of the recall to be $82 million, which we recorded as an assumed liability in our purchase price allocation related to the acquisition of Maytag, with aF-38STATEMENTS—STATEMENTS - (CONTINUED)corresponding increaserecorded goodwill. Assupport purchases following its normal credit policies. If a customer were to default on its line of September 30,credit with the bank, our subsidiary would be required to satisfy the obligation with the bank and the receivable would revert back to the subsidiary. At December 31, 2011 and 2010, the guaranteed amounts totaled $467 million and $386 million, respectively. Our subsidiary insures against credit risk for these guarantees, under normal operating conditions, through policies purchased from high-quality underwriters.had revised this estimateguaranteed a $50 million five year revolving credit facility between certain financial institutions and a not-for-profit entity in connection with a community and economic development project (“Harbor Shores”). The fair value of the guarantee was nominal. The purpose of Harbor Shores is to $102 million due to an anticipated increasestimulate employment and growth in the response rate.areas of Benton Harbor and St. Joseph, Michigan. In the event of default, we must satisfy the guarantee of the credit facility up to the amount borrowed at the date of default.incremental increasePeople's Republic of $20China (PRC). These drafts have certain recourse provisions afforded to transferees explicitly and under PRC laws. If a transferee were to exercise its available recourse rights, our subsidiaries in the PRC would be required to satisfy the obligation with the transferee and the draft would revert back to the subsidiary. At December 31, 2011 and 2010 the outstanding drafts transferred and outstanding totaled $47 million was charged to cost of products sold in and $18 million, respectively. Transferees have not exercised their recourse rights against our Consolidated Statement of Incomesubsidiaries during 2008. Of this $102 million accrual,2011 or 2010.approximately $7noncancelable operating lease commitments totaling $835 million remaining at December 31, 2008, all of which. The annual future minimum lease payments are summarized by year in the table below:Millions of dollars 2012 $ 184 2013 149 2014 112 2015 97 2016 79 Thereafter 214 Total noncancelable operating lease commitments $ 835 paid during 2009.$218 million, $214 million and $208 million for 2011, 2010 and 2009, respectively.Millions of dollars 2012 $ 275 2013 165 2014 107 2015 68 2016 52 Thereafter 131 Total purchase obligations $ 798 value.value based on market rates. Derivatives where we elect hedge accounting are designated as either cash flow or fair value hedges. Derivatives that are not accounted for based on hedge accounting are marked to market through earnings. The accounting for changes in the fair value of a derivative depends on the intended use and designation of the derivative instrument. For a derivative instrument designated as a fair value hedge, the gain or loss on the derivative is recognized in earnings in the period of change in fair value together with the offsetting gain or loss on the hedged item. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of Other Comprehensive Income (“OCI”) and is subsequently recognized in earnings when the hedged exposure affects earnings. Hedging ineffectiveness and a net earnings impact occur when the change in the fair value of the hedge does not offset the change in the fair value of the hedged item. The ineffective portion of the gain or loss is recognized in earnings. Gains and losses from changes in fair values of derivatives that are not designated as hedges for accounting purposes are recognized in earnings.StrategyWe are exposed to certainstrategyoperations. As a result, we enter into derivative transactions to manage certain of these exposures that ariseoperations including those arising from changes in the normal course of business. The primary risks managed by using derivative instruments are foreign currency exchange rate,rates, interest rates and commodity price and domestic and foreign interest rate risks.prices. Fluctuations in these rates and prices can affect our operating results and financial condition. We manage the exposure to these market risks through operating and financing activities and throughuse a variety of strategies, including the use of derivative financial instruments. We do not enter into derivative financial instruments for trading or speculative purposes.thethese hedges is to reduce the variability of cash flows associated with the forecasted purchase of those commodities.F-39NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)basis, thus reducing the impact of interest rate changes on future interest expense.basis. These agreements involve either the receipt or payment of floating rate amounts in exchange for fixed rate interest payments or receipts, respectively, over the life of the agreements without an exchange of the underlying principal amounts.table summarizestables summarize our outstanding derivative contracts and their effects on our Consolidated Balance SheetSheets at December 31, 2009: Fair Value of(1) Notional
Amount Hedge
Assets Hedge
Liabilities Term $ 1,090 $ 40 $ 54 (CF)/(FV) Various, up to 15 months 486 109 2 (CF)/(FV) Various, up to 29 months $ 149 $ 56 $ 801 $ 6 $ 4 Various, up to 5 months 24 4 2 Various, up to 24 months 10 6 $ 159 $ 62 Fair Value of Millions of dollars Notional Amount Hedge Assets Hedge Liabilities Maximum Term (Months) 2011 2010 2011 2010 2011 2010 2011 2010 Derivatives accounted for as hedges Foreign exchange forwards/options $ 862 $ 909 $ 24 $ 13 $ 19 $ 31 (CF/FV) 18 15 Commodity swaps/options 316 539 9 129 28 2 (CF/FV) 36 24 Interest rate derivatives 250 — — — 5 — (CF) 6 — Total derivatives accounted for as hedges $ 33 $ 142 $ 52 $ 33 Derivatives not accounted for as hedges Foreign exchange forwards/options $ 1,261 $ 990 $ 6 $ 11 $ 43 $ 3 N/A 3 10 Commodity swaps/options 3 13 — 11 1 3 N/A 11 12 Total derivatives not accounted for as hedges 6 22 44 6 Total derivatives $ 39 $ 164 $ 96 $ 39 Current $ 36 $ 135 $ 91 $ 39 Noncurrent 3 29 5 — Total derivatives $ 39 $ 164 $ 96 $ 39 (1) Periodic adjustments from fair valuing hedge assets and liabilities are recorded in other current assets and other assets or other current liabilities and other liabilities. As of December 31, 2009, hedge assets of $119 million and $40 million were recorded in other current assets and other assets, respectively, and hedge liabilities of $61 million and $1 million were recorded in other current liabilities and other liabilities, respectively.(2)Designated derivativesDerivatives accounted for as hedges are either considered cash flow (CF) or fair value (FV) hedges (FV).StatementStatements of Income for the year ended December 31, 20092011 and 2010 are as follows: Gain (Loss)
Recognized in OCI
(Effective Portion) Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)(1) Gain (Loss)
Recognized in Income
(Ineffective Portion)(2) $ (23 ) $ 8 (a)(b) $ 1 196 (101 )(b) 2 1 1 (c) — $ 174 $ (92 ) $ 3 Cash Flow Hedges - Millions of dollars 2011 2010 2011 2010 2011 2010 Foreign exchange forwards/options $ 3 $ (34 ) $ (16 ) $ (32 ) (a)(b) $ — $ 2 Commodity swaps/options (60 ) 104 96 79 (b) 2 1 Interest rate derivatives (5 ) — — — (a) — — $ (62 ) $ 70 $ 80 $ 47 $ 2 $ 3 Fair Value Hedges - Millions of dollars Hedged Item 2011 2010 2011 2010 Foreign exchange forwards/options $ 8 $ (12 ) $ (8 ) $ 12 Derivatives not Accounted for as Hedges - Millions of dollars 2011 2010 Foreign exchange forwards/options $ (1 ) $ 37 Commodity swaps (1 ) 1 $ (2 ) $ 38 (1)(1) Gains and losses reclassified from accumulated OCI intoand recognized in income are recorded in (a) interest and sundry income (expense), or (b) cost of products sold or (c) interest expense.sold.(2)(2) Gains and losses recognized in income related to the ineffective portion of hedges are recorded in interest and sundry income (expense). F-40NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED) Gain (Loss) Recognized
on Derivative(3) Gain (Loss) Recognized
on Related
Hedged Items(3) Hedged Item $ (7 ) $ 7 Non-functional
currency assets
and liabilities(3)(3) Gains and losses recognized in income are recorded in interest and sundry income (expense). Gain (Loss)
Recognized on
Undesignated Hedges(4) $ 70 (6 ) $ 64 (4)(4) Mark to market gains and losses recognized in income are recorded in interest and sundry income (expense). other comprehensive incomeOCI related to contracts maturing and expected to be realized during the next twelve months is a gain of $57$10 million at December 31, 2009.Early Hedge Settlement.During November and December 2008, we cash settled certain foreign currency derivative contracts prior to their scheduled settlement dates. As a result of these transactions, we received $82 million in cash, which represented the fair value of these contracts at the date of settlement. Effective gains of $82 million were initially recorded in accumulated OCI until the hedged forecasted transactions affected earnings, then the gains were recorded as a reduction in cost of products sold on our Consolidated Statements of Income. Approximately $10 million of these gains were recorded in earnings during 2008 and the remainder was recorded in earnings in 2009. There was no ineffectiveness related to these settled foreign currency derivative contracts.F-41NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)common stockholders at December 31, 2007, 20082009, 2010, and 2009,2011, and the activity for the years then ended: Foreign
Currency Derivative
Instruments Unrecognized
Pension and
Postretirement
Liability Marketable
Securities Total $ (376 ) $ 48 $ (315 ) $ — $ (643 ) 320 (68 ) — 17 269 — — 225 — 225 (34 ) 4 (79 ) — (109 ) 286 (64 ) 146 17 385 275 (65 ) 146 17 373 (101 ) (17 ) (169 ) 17 (270 ) (461 ) (161 ) — (10 ) (632 ) — — (726 ) — (726 ) 34 47 274 — 355 (427 ) (114 ) (452 ) (10 ) (1,003 ) (424 ) (103 ) (452 ) (10 ) (989 ) (525 ) (120 ) (621 ) 7 (1,259 ) 333 266 — 1 600 — — (109 ) — (109 ) (23 ) (86 ) 27 — (82 ) 310 180 (82 ) 1 409 299 173 (82 ) 1 391 $ (226 ) $ 53 $ (703 ) $ 8 $ (868 ) Millions of dollars Total December 31, 2008 $ (525 ) $ (120 ) $ (621 ) $ 7 $ (1,259 ) Unrealized gain 333 266 — 1 600 Unrealized actuarial loss and prior service credit (cost) — — (109 ) — (109 ) Tax effect (23 ) (86 ) 27 — (82 ) Other comprehensive income (loss), net of tax 310 180 (82 ) 1 409 Less: Other comprehensive income available to noncontrolling interests 11 7 — — 18 Other comprehensive income (loss) available to Whirlpool 299 173 (82 ) 1 391 December 31, 2009 $ (226 ) $ 53 $ (703 ) $ 8 $ (868 ) Unrealized gain (loss) (59 ) 23 — (10 ) (46 ) Unrealized actuarial gain (loss) and prior service credit (cost) — — 24 — 24 Tax effect 36 (7 ) (29 ) — — Other comprehensive income (loss), net of tax (23 ) 16 (5 ) (10 ) (22 ) Less: Other comprehensive income available to noncontrolling interests 3 — — — 3 Other comprehensive income (loss) available to Whirlpool (26 ) 16 (5 ) (10 ) (25 ) December 31, 2010 $ (252 ) $ 69 $ (708 ) $ (2 ) $ (893 ) Unrealized gain (loss) (86 ) (147 ) — (4 ) (237 ) Unrealized actuarial gain (loss) and prior service credit (cost) — — (177 ) — (177 ) Tax effect (36 ) 47 65 — 76 Other comprehensive income (loss), net of tax (122 ) (100 ) (112 ) (4 ) (338 ) Less: Other comprehensive income (loss) available to noncontrolling interests (2 ) (3 ) — — (5 ) Other comprehensive income (loss) available to Whirlpool (120 ) (97 ) (112 ) (4 ) (333 ) December 31, 2011 $ (372 ) $ (28 ) $ (820 ) $ (6 ) $ (1,226 ) For the years ended December 31, 2009, 2008Basic and 2007, a total of approximately 3,090,508 options, 2,728,410 options and 1,709,000 options, respectively, were excluded from the calculation of diluted net earnings per share because their exercise prices would render them anti-dilutive.F-42Millions of dollars and shares 2011 2010 2009 Numerator for basic and diluted earnings per share – net earnings available to Whirlpool $ 390 $ 619 $ 328 Denominator for basic earnings per share – weighted-average shares 76.8 76.2 74.6 Effect of dilutive securities – stock-based compensation 1.3 1.4 1.0 Denominator for diluted earnings per share – adjusted weighted-average shares 78.1 77.6 75.6 Anti-dilutive stock options/awards excluded from earnings per share 2.1 1.6 3.0 STATEMENTS—STATEMENTS - (CONTINUED)Basic and diluted earnings per share from continuing operations were calculated as follows: 2009 2008 2007 $ 328 $ 418 $ 640 74.6 75.1 78.5 1.0 0.9 1.4 75.6 76.0 79.9 Decemberfourth quarter of 2009, quarter, our Latin America region entered into a definitive agreement to purchase 1.8% of the outstanding noncontrolling interest in Brasmotor S.A. for $12 million.$12 million. This transaction closed on January 15, 2010 and raised our ownership interest in Brasmotor S.A. to 95.6%.In June 2004,April 23, 2008, our Board of Directors authorized a share repurchase program of up to $500 million. During 2007, we repurchased 3.8$500 million shares at an aggregate purchase price of $368 million and during the March 2008 quarter, we repurchased 1.1 million shares at an aggregate purchase price of $97 million under this program. At March 31, 2008, there were no remaining funds authorized under this program.On April 23, 2008, our Board of Directors authorized a new share repurchase program of up to $500 million.. Share repurchases are made from time to time on the open market as conditions warrant. During 2008, we repurchased 1.9 million shares at an aggregate purchase price of $150 million under this program. We made There have been no share repurchases during 2009.since 2008. At December 31, 2009,2011, there were $350was $350 million remaining funds authorized under this program.Preferred Stock Purchase RightsRights to repurchase preferred stock under the Rights Agreement dated April 12, 1998 expired on May 22, 2008 pursuant to the terms of the Rights Agreement.$27$37 million $30, $29 million and $40$27 million in 2009, 2008,2011, 2010, and 2007,2009, respectively. Related income tax benefits recognized in earnings were $10$13 million $11, $10 million and $15$10 million in 2009, 2008,2011, 2010, and 2007,2009, respectively.2009,2011, unrecognized compensation cost related to non-vested stock option and stock unit awards totaled $33 million.$39 million. The cost of these non-vested awards is expected to be recognized over a weighted-average remaining vesting period of 34 months.shareholdersstockholders approved the 2007 Omnibus Stock and Incentive Plan (“2007 OSIP”). This plan was previously adopted by our Board of Directors on February 20, 2007 and provides for the issuanceF-43NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)2009, approximately 630 thousand2010, no shares remain available for issuance under the 2007 OSIP, our only active plan.three-yearthree-year period, expire 10 years from the date of grant and are subject to forfeiture upon termination of employment.employment, other than by death, disability or retirement. We use the Black-Scholes option-pricing model to measure the fair value of stock options granted to employees. Granted options have exercise prices equal to the market price of Whirlpool common stock on the grant date. The principal assumptions utilizedused in valuing options include: (1) risk-free interest rate—an estimate based on the yield of U.S.United States zero coupon securities with a maturity equal to the expected life of the option; (2) expected volatility—an estimate based on the historical volatility of Whirlpool common stock for a period equal to the expected life of the option; and (3) expected option life—an estimate based on historical experience. Stock options are expensed on a straight-line basis, net of estimated forfeitures. Based on the results of the model, the weighted-average fair values of stock options granted during the years ended December 31, 2009, 2008,for 2011, 2010, and 20072009 were $6.42, $21.03$24.74, $36.84 and $22.54,$6.42, respectively, using the following assumptions: 2009 2008 2007 1.9 % 3.0 % 4.7 % 37.5 % 28.1 % 22.6 % 5.5 % 2.0 % 1.9 % 5 years 5 years 5 years Weighted Average Black-Scholes Assumptions 2011 2010 2009 Risk-free interest rate 2.3 % 3.3 % 1.9 % Expected volatility 36.5 % 40.3 % 37.5 % Expected dividend yield 2.0 % 1.8 % 5.5 % Expected option life, in years 5 7 5 the year ended December 31, 2009: Number
of Options Weighted-
Average
Exercise
Price 4,137 $ 87.81 1,451 32.09 (404 ) 51.91 (487 ) 108.93 4,697 $ 71.32 2,874 $ 87.34 Thousands of shares, except per share data Outstanding at January 1 3,428 $ 71.20 Granted 625 85.46 Exercised (244 ) 46.63 Canceled or expired (346 ) 120.64 Outstanding at December 31 3,463 $ 70.63 Exercisable at December 31 2,484 $ 73.10 $9$9 million $10, $40 million, and $39$9 million for the years ended December 31, 2009, 20082011, 2010, and 2007,2009, respectively. The related tax benefits were $3$3 million $3, $14 million and $15$3 million in 2009, 2008 for 2011, 2010, and 2007,2009, respectively. Cash received from the exercise of stock options was $21$14 million $21, $72 million, and $68$21 million for the years ended December 31, 2009, 20082011, 2010, and 2007,2009, respectively.2009: Outstanding Net
of Expected
Forfeitures Options
Exercisable 4,545 2,874 $ 72.47 $ 87.34 $ 82 $ 21 5.9 4.3 F-44NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED):Options in thousands / dollars in millions, except share data Number of options 3,389 2,484 Weighted-average exercise price per share $ 70.30 $ 73.10 Aggregate intrinsic value $ 16 $ 10 Weighted-average remaining contractual term, in years 6 5 the years ended December 31, 2009, 20082011, 2010, and 20072009 were $26.51, $55.83$82.55, $87.17 and $96.81,$26.51, respectively.the year ended December 31, 2009: Number of
Stock Units Weighted- Average
Grant Date Fair
Value 1,108 $ 77.66 660 26.51 (198 ) 41.83 (354 ) 85.67 1,216 $ 52.87 Stock units in thousands, except per-share data Non-vested, at January 1 1,486 $ 60.60 Granted 297 82.55 Canceled (66 ) 70.07 Vested and transferred to unrestricted (243 ) 63.03 Non-vested, at December 31 1,474 $ 64.32 PlanOurAwardsEquity Plan provides forreceived the following equity compensation (1) a one time grant of 1,000 shares of Whirlpool common stock made at the time a director first joins the Board; (2) an annual grant of stock options, with the number of options to be determined by dividing $36,000$50,000 by the productfair value of the fair market value of a single share of our common stock onoption granted, as calculated using the final trading day before the annual meeting of stockholders multiplied by 0.35;Black-Scholes valuation model; and (3) an annual grant of stock, with the number of shares to be issued to the director determined by dividing $54,000$50,000 by the average fair market valueclosing price of a single shareWhirlpool common stock on the date of the annual meeting of our common stock for the final three trading days before the grant.stockholders. The exercise price under each option granted is the fair market valueclosing price of theWhirlpool common stock on the last trading day before theof Whirlpool's annual meeting of stockholders.Underongoing global operating platformmargins and improve our earnings through substantial cost and capacity reductions, primarily within our North America and EMEA operating segments. Previous restructuring plans have been consolidated into the 2011 Plan beginning with the fourth quarter 2011. Including previously announced restructuring initiatives, we implemented certain restructuring initiativesexpect to strengthen our leadership positionincur approximately $500 million of total costs beginning in the global appliance industry. fourth quarter 2011 with completion expected by the end of 2013.plan to continue a comprehensive worldwide effort to optimize our regional manufacturing facilities, supply base, product platforms and technology resources to support our global brands and customers. We incurredrecognized $136 million in total restructuring chargescosts during 2011, of $126which $78 million $149 was associated with the 2011 Plan. The remaining $58 million $61 million of restructuring costs related to plans (the "Old Plans") that were completed during 2011 or have now been consolidated into the years2011 Plan.2009, 2008, 2007 respectively. These charges are included in restructuring costs in our Consolidated Statements of Income and primarily consist ofF-4512/31/2010 Charge to Earnings Cash Paid Non-cash and Other Revision of Estimate Transfer to "2011 Plan" 12/31/2011 Termination costs $ 36 $ 37 $ (51 ) $ — $ — $ (22 ) $ — Non-employee exit costs 14 21 (9 ) (5 ) (4 ) (17 ) — Total $ 50 $ 58 $ (60 ) $ (5 ) $ (4 ) $ (39 ) $ — 12/31/2010 Transfer from "Old Plans" Charge to Earnings Cash Paid Non-cash and Other Revision of Estimate 12/31/2011 Cumulative Charges Expected Total Charges Termination costs $ — $ 22 $ 56 $ (15 ) $ (1 ) $ — $ 62 $ 56 $ 310 Non-employee exit costs — 17 22 (10 ) (13 ) — 16 22 190 Total $ — $ 39 $ 78 $ (25 ) $ (14 ) $ — $ 78 $ 78 $ 500 STATEMENTS—STATEMENTS - (CONTINUED)charges to restructure the cooking platform in Latin America, shift refrigeration and dishwasher capacity within Europe and North America, shift cooking capacity within North America, restructure the laundry platforms in North America, Europe and Asia and reorganize the salaried workforce throughout North America and Europe.On October 27, 2008, management committed to a workforce reduction plan to reduce our employee base worldwide beginning during the fourth quarter of 2008 through the beginning of 2010. We expect to incur approximately $100 million in employee termination costs, $14 million in asset impairment costs and $3 million in other associated costs for a total of $117 million that will be incurred as a result of this workforce reduction. We incurred charges of $39 million in 2009 and $64 million in 2008 associated with this workforce reduction, which are included in the $126 million and $149 million, respectively, in totaldiscussed above. As offor the 2011 Plan, by operating segment, for the year ended December 31, 2009, approximately $15 million of these workforce reduction costs remain, all of which will result in future cash expenditures.Our 2008 restructuring initiatives are reducing our overall workforce by approximately 5,000 employees and contractors worldwide through the beginning of 2010. We expect to incur additional costs of $14 million in our Europe region and $1 million in our North American region through the beginning of 2010 related to these initiatives.2011. For additional information about restructuring charges by businessoperating segment, see Note 13.On August 28, 2009, we announced changes to our North America manufacturing operations which will result in the closure of our manufacturing facility in Evansville, Indiana in mid-2010. We currently expect that approximately 1,100 full-time positions will be eliminated as a result13 of the closure. We estimate that we will incur approximately $50Notes to the Consolidated Financial Statements.Millions of dollars 2011 Charges Cumulative Charges Expected Total Charges North America $ 53 $ 53 $ 342 Latin America 2 2 10 EMEA 21 21 135 Asia 1 1 10 Corporate / Other 1 1 3 Total $ 78 $ 78 $ 500 total costs in connection with2011, 2010 and 2009, respectively. The following table summarizes the exitdifference between income tax expense at the United States statutory rate of this facility comprised of $20 million in employee termination costs, $13 million in equipment relocation costs, $5 million in asset impairment costs, 35%and $12 million in other associated costs. During 2009 we incurred $20 million associated with this announcement, $14 million of which is included in the $126 million in total restructuring charges discussed above. We expect to recognize approximately $27 million of these costs in the income tax benefit at effective worldwide tax rates for 2011, 2010 fiscal year, $2 million of these costs in the 2011 fiscal year and estimate that approximately $31 million of the estimated $50 million in total cost will result in future cash expenditures. As of December 31, 2009 approximately $30 million of these closure costs remain, all of which will result in future cash expenditures.A summary ofMillions of dollars 2011 2010 2009 Earnings (loss) before income taxes United States $ (240 ) $ (256 ) $ (110 ) Foreign 212 842 403 Earnings (loss) before income taxes (28 ) 586 293 Income tax computed at United States statutory rate (10 ) 205 103 U.S. government tax incentives, including Energy Tax Credits (379 ) (230 ) (125 ) Foreign government tax incentives, including BEFIEX (100 ) (103 ) (44 ) Foreign tax rate differential (13 ) (46 ) (31 ) U.S. foreign tax credits (37 ) (28 ) (19 ) Valuation allowances 11 (9 ) 10 Deductible interest on capital — (7 ) (15 ) State and local taxes, net of federal tax benefit (4 ) (2 ) 1 Medicare Part D subsidy — — 12 Foreign withholding taxes 10 12 15 Non-deductible government settlements 30 33 — U.S. tax on foreign dividends and subpart F income 26 49 10 Settlement of global tax audits 10 56 22 Other items, net 20 6 — Income tax computed at effective worldwide tax rates $ (436 ) $ (64 ) $ (61 ) restructuring liability balanceincome tax (benefits) provisions for 2011, 2010 and full year restructuring activity for 2009 2008 and 2007 is as follows: January 1,
2009 Balance Charge to
Earnings Cash Paid Non-Cash Revision of
Estimate Translation December 31,
2009 Balance $ 82 $ 86 $ (93 ) $ (3 ) $ (2 ) $ (2 ) $ 68 22 40 (15 ) (29 ) (4 ) 1 15 $ 104 $ 126 $ (108 ) $ (32 ) $ (6 ) $ (1 ) $ 83 $ 56 $ 134 $ (86 ) $ — $ (21 ) $ (1 ) $ 82 44 15 (12 ) (18 ) (7 ) — 22 $ 100 $ 149 $ (98 ) $ (18 ) $ (28 ) $ (1 ) $ 104 $ 128 $ 34 $ (95 ) $ — $ (13 ) $ 2 $ 56 49 27 (30 ) (18 ) 16 — 44 $ 177 $ 61 $ (125 ) $ (18 ) $ 3 $ 2 $ 100 F-46 2011 2010 2009 Millions of dollars Current Deferred Current Deferred Current Deferred United States $ (18 ) $ (464 ) $ (101 ) $ (204 ) $ 11 $ (182 ) Foreign 114 (64 ) 204 41 115 (4 ) State and local (1 ) (3 ) (5 ) 1 (4 ) 3 $ 95 $ (531 ) $ 98 $ (162 ) $ 122 $ (183 ) Total income tax benefit $ (436 ) $ (64 ) $ (61 ) STATEMENTS—STATEMENTS - (CONTINUED)Foryears ended December 31,United States energy strategy. Among the many provisions were manufacturers' tax credits for the accelerated United States production of super-efficient clothes washers, refrigerators and dishwashers that meet or exceed certain Energy Star thresholds for energy and water conservation levels as set by the United States Department of Energy (“Energy Credit”). The tax credits applied to eligible production during the 2008 to 2011 calendar years. We have historically, and will continue to, invest over 2% of our annual sales in research and development to provide innovative and energy efficient products for our customers. As a result, during 2011, 2010 and 2009 2008 and 2007,we recognized a tax credit benefit under the revisionsprovisions of estimatesthe Act related to the Maytagproduction of qualifying appliances.exit, relocationearned tax credits under the Brazilian government’s export incentive program (BEFIEX). These credits reduce Brazilian federal excise taxes on domestic sales, resulting in an increase in the operations’ recorded net sales. After a favorable court decision in 2005, upheld by a December 2011 appellate court decision, we were able to recognize approximately $266 million, $225 million, and employee termination accruals were$69 million of export credits during 2011, 2010 and 2009, respectively. Export credits recognized are not subject to income taxes. We recognize export credits as they are monetized; however, future actions by the Brazilian government could limit our ability to monetize these export credits. As of December 31, 2011, approximately $6$238 million $25 of future cash monetization remained, including $60 million of related court awarded fees, which will be payable in subsequent years. A Brazilian law change to the inflation index tables reduced available cash monetization by $62 million in 2011.$3the benefits recognized in our financial statements. Such amounts represent a reasonable provision for taxes ultimately expected to be paid, and may need to be adjusted over time as more information becomes known. We are no longer subject to any significant United States federal, state, local or foreign income tax examinations by tax authorities for years before 2005. respectively, which were recorded with a corresponding offset to goodwill.(11) INCOME TAXESIncome tax (benefit) expense is as follows: 2009 2008 2007 $ 10 $ 9 $ (28 ) (3 ) 14 8 115 66 128 122 89 108 (182 ) (309 ) 28 3 (31 ) 3 (4 ) 50 (22 ) (183 ) (290 ) 9 $ (61 ) $ (201 ) $ 117 Domestic and of foreign earnings (loss) before income taxes and other items are as follows: 2009 2008 2007 $ (110 ) $ (433 ) $ 103 404 679 701 $ 294 $ 246 $ 804 Reconciliations betweenover the next several years. This distribution is forecasted to result in tax expense at the U.S. federal statutory income tax ratebenefits which have not been recorded because of 35% and the consolidated effective income tax rate for earnings from continuing operations before income taxes and other items are as follows: 2009 2008 2007 35.0 % 35.0 % 35.0 % (42.5 ) (42.6 ) (3.7 ) (15.1 ) (34.5 ) (7.6 ) (10.6 ) (9.4 ) (1.4 ) 7.6 (8.6 ) 2.7 (6.3 ) (73.9 ) (2.2 ) 5.1 4.7 1.9 (5.1 ) (13.4 ) (2.7 ) 4.0 — (0.6 ) 3.6 66.6 0.7 3.3 2.1 (7.1 ) (1.3 ) 0.7 1.9 0.3 (6.7 ) 1.0 — — (1.1 ) 1.4 (1.7 ) (2.3 ) (20.6 )% (81.7 )% 14.5 % 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.F-47NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)Significant components of ourtheir contingent nature. There has been no deferred tax liabilitiesliability provided on the remaining amount of unremitted earnings of $3 billion at December 31, 2011. Should we make a distribution out of the $3 billion of unremitted earnings, we would be subject to additional United States taxes (subject to an adjustment for foreign tax credits) and assets from continuing operations are as follows: 2009 2008 $ 622 $ 633 185 229 55 86 43 — 26 — 17 17 13 12 11 22 123 164 1,095 1,163 595 306 514 439 317 175 302 470 150 87 68 323 66 68 57 57 56 75 47 4 27 28 8 — 10 109 238 218 2,455 2,359 (180 ) (147 ) 2,275 2,212 $ 1,180 $ 1,049 2009,2011, we havehad net operating loss carryforwards of $2,689 million, $1,063 million$3 billion, $1.4 billion of which are U.S.were United States state net operating loss carryforwards. Of the total net operating loss carryforwards, $751 million$1.1 billion do not expire, with substantially all of the remaining carryforwards expiring in various years through 2029.2031. As of December 31, 2009,2011, we had $47$212 million of foreign tax credit carryforwards and $317$934 million of U.S.United States general business credit carryforwards available to offset future payments of federal income taxes, expiring between 20162015 and 2029.$180$208 million at December 31, 20092011 consists of $149$195 million of net operating loss carryforward deferred tax assets and $31$13 million of other deferred tax assets. We believe that it is more likely than not that we will realize the benefit of existing deferred tax assets, net of valuation allowances mentioned above.F-48STATEMENTS—STATEMENTS - (CONTINUED)We have historically reinvested all unremitted earnings of our foreign subsidiaries and affiliates. We plan to distribute approximately $139 million of foreign earnings over the next several years. This distribution is forecasted to result inMillions of dollars 2011 2010 Deferred tax liabilities Intangibles $ 527 $ 577 Property, net 149 103 LIFO inventory 30 54 Other 178 256 Total deferred tax liabilities 884 990 Deferred tax assets U.S. general business credit carryforwards, including Energy Tax Credits 934 555 Pensions 468 455 Loss carryforwards 554 351 Postretirement obligations 190 252 Foreign tax credit carryforwards 212 175 Research and development capitalization 200 153 Employee payroll and benefits 112 139 Accrued expenses 94 77 Product warranty accrual 60 68 Receivable and inventory allowances 47 48 Other 166 212 Total deferred tax assets 3,037 2,485 Valuation allowances for deferred tax assets (208 ) (193 ) Deferred tax assets, net of valuation allowances 2,829 2,292 Net deferred tax assets $ 1,945 $ 1,302 which have not been recorded because of their contingent nature. There has been no deferred tax liability provided on the remaining amount of unremitted earnings of $2.4 billion at December 31, 2009. Should we make distribution out of the $2.4 billion of unremitted earnings, we would be subject to additional U.S. taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. It is not practicable to estimate the amount of the deferred tax liability associated with these unremitted earnings.On October 3, 2008, The Emergency Economic Stabilization Act of 2008 (the “Act”) was signed into law. The Act includes a wide-range of provisions that are intended to ensure that conservation and efficiency are a central component to the United States energy strategy. Among the many provisions of this legislation are manufacturers’ tax credits for the accelerated U.S. production of super-efficient clothes washers, refrigerators and dishwashers that meet or exceed certain Energy Star thresholds for energy and water conservation levels as set by the U.S. Department of Energy (“Energy Credit”). The tax credits apply to eligible production during the 2008 to 2010 calendar years provided the production of qualifying product in any individual year exceeds a rolling two year baseline of production. We have historically, and will continue to, invest over 2% of our annual sales in research and development to provide innovative and energy efficient products that meet these standards for our customers. As a result, during 2008 and 2009 and in 2010 we expect to record a tax credit benefit under the provisions of the Act related to the production of qualifying appliances. Including the Energy Credit, total general business tax credits recorded during 2009 reduced our effective tax rate by 42.5%.We are in various stages of audits by certain governmental tax authorities. We establish liabilities for the difference between tax return provisions and the benefits recognized in our financial statements. Such amounts represent a reasonable provision for taxes ultimately expected to be paid, and may need to be adjusted over time as more information becomes known.We adopted ASC 740, “Income Taxes” (formerly FIN 48 “Accounting for Uncertainty in Income Taxes—an interpretation of FASB 109” (“FIN 48”)) on January 1, 2007, at which time the total amount of gross unrecognized tax benefit on the Consolidated Balance Sheet was $166 million. Upon adoption of FIN 48, we recognized a $2 million increase in the liability for unrecognized tax benefits and a $2 million decrease in federal benefit related to state uncertain tax positions. The increase was accounted for as a reduction to retained earnings in the amount of $8 million and a reduction to goodwill in the amount of $4 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2009 2008 $ 119 $ 189 47 4 15 2 (6 ) (39 ) (2 ) (37 ) (10 ) — $ 163 $ 119 Included in the liability for unrecognized tax benefits at December 31, 2009 and 2008 are $163 and $119 million, respectively, of unrecognized tax benefits that if recognized would impact the effective tax rate, net of $15 million and $16 million, respectively, ofexcluding federal benefits related toof state uncertainand local tax positions.F-49NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)We recognize charges related topositions, and interest and penalties for unrecognized tax benefits as a component of income tax expense. As of December 31, 2009 and 2008, we have accrued interest and penalties of $26 and $25 million, respectively. Interest and penalties are not included in the tabular rollforward of unrecognized tax benefits above.Included in additionspenalties:Millions of dollars 2011 2010 2009 Balance, January 1 $ 190 $ 157 $ 119 Additions for tax positions of the current year 9 2 41 Additions for tax positions of prior years 10 83 25 Reductions for tax positions of prior years (24 ) (50 ) (16 ) Settlements during the period (1 ) (1 ) (2 ) Lapses of applicable statute of limitation (6 ) (1 ) (10 ) $ 178 $ 190 $ 157 the current year are $13prior years in 2010 includes $43 million of unrecognized tax positions related to United States transfer pricing and Brazilian income tax on export profits.September 30, 2009 settlement with the Brazilian competition commission. ForSee Note 6 of the Notes to the Consolidated Financial Statements for additional information see Note 6.We file income tax returns in the U.S. federal, various state, local and foreign jurisdictions. We are no longer subject to any significant U.S. federal, state, local or foreign income tax examinations by tax authorities for years before 2006. The Internal Revenue Service commenced an examination of our U.S. income tax returns for 2006 and 2007 in the fourth quarter of 2008 that is anticipated to be completed during early 2011. information.$12$43 million could be settled with thevarious related jurisdictions during the next 12 months.MEDICAL BENEFITSBENEFIT PLANSsubstantially allcertain employees in North America, Europe, Asia and Brazil. The United States plans are frozen for the majority of our North American employees and certain European, Asian and Brazilian employees.participants. The formula for U.S.United States salaried employees covered under the qualified defined benefit plan sponsored by Whirlpool was based on years of service and final average salary, while the formula for U.S.United States hourly employees covered under the defined benefit plans sponsored by Whirlpool was based on specific dollar amounts for each year of service. There were multiple formulas for employees covered under the qualified and nonqualified defined benefit plans sponsored by Maytag, including a cash balance formula. The U.S. plans are frozen for the majority of participants. A defined contribution plan is being provided to all U.S. employees subsequent to the pension plan freezes and is not classified within the net periodic benefit cost. In addition, we sponsor an unfunded Supplemental Executive Retirement Plan. This plan is nonqualified and provides certain key employees defined pension benefits that supplement those provided by the company’s other retirement plans.The U.S. qualifiedpension plans provide thatcost. In January 2012, we began contributing the company match and automatic company contributions (up to 7% of employees’ eligible pay) in the event of acompany stock. Our contributions during 2011, 2010 and 2009 were $68 million, $65 million and $40 million, respectively. Company matching contributions to our defined contribution plan termination within five years (36 months for the defined benefit plan sponsored by Maytag) following a change in control of Whirlpool, any assets held by the plans in excess of the amounts neededwere suspended from February 2009 to fund accrued benefits would be used to provide additional benefits to plan participants. A change in control generally means either a change in the majority of the incumbent Board of Directors or an acquisition of 25% (30% for purposes of the Whirlpool Production Employees Retirement Plans and 20% for purposes of the defined benefit plan sponsored by Maytag) or more of the voting power of Whirlpool’s outstanding stock.U.S.United States employees. Eligible retirees include those who were full-time employees with 10 years of service who attained age 55 while in service with us and those union retirees who met the eligibility requirements of their collective bargaining agreements. In general, the postretirement health care plans are contributory with participants’ contributions adjusted annually and generally include cost-sharing provisions that limit our exposure for recent and future retirees. The plans are unfunded. We reserve the right to modify the benefits in the future. We provide no significant postretirement medical benefits to non-U.S.non-United States employees. Foreign Pension Benefits Millions of dollars 2011 2010 2011 2010 2011 2010 Funded status Fair value of plan assets $ 2,573 $ 2,288 $ 170 $ 172 $ — $ — Benefit obligations 3,872 3,605 373 389 488 671 Funded status $ (1,299 ) $ (1,317 ) $ (203 ) $ (217 ) $ (488 ) $ (671 ) Amounts recognized in the statement of financial position Noncurrent asset $ — $ — $ 5 $ 5 $ — $ — Current liability (8 ) (7 ) (12 ) (13 ) (58 ) (61 ) Noncurrent liability (1,291 ) (1,310 ) (196 ) (209 ) (430 ) (610 ) Amount recognized $ (1,299 ) $ (1,317 ) $ (203 ) $ (217 ) $ (488 ) $ (671 ) Amounts recognized in accumulated other comprehensive income (pre-tax) Net actuarial loss (gain) $ 1,510 $ 1,255 $ 65 $ 68 $ (1 ) $ 2 Prior service (credit) cost (23 ) (27 ) 5 5 (296 ) (224 ) Transition (asset) obligation — — (1 ) (1 ) 1 1 Amount recognized $ 1,487 $ 1,228 $ 69 $ 72 $ (296 ) $ (221 ) Foreign Pension Benefits Millions of dollars 2011 2010 2011 2010 2011 2010 Benefit obligation, beginning of year $ 3,605 $ 3,637 $ 389 $ 383 $ 671 $ 761 Service cost 2 3 7 6 8 9 Interest cost 192 200 20 20 31 38 Plan participants’ contributions — — 2 2 10 17 Actuarial loss (gain) 318 57 — 20 (6 ) (40 ) Benefits paid, net of federal subsidy (245 ) (292 ) (31 ) (45 ) (74 ) (73 ) Plan amendments — — — 2 (148 ) (43 ) New plans — — — 10 — — Settlements / Curtailment loss (gain) — — — (2 ) — — Foreign currency exchange rates — — (14 ) (7 ) (4 ) 2 Benefit obligation, end of year $ 3,872 $ 3,605 $ 373 $ 389 $ 488 $ 671 Accumulated benefit obligation, end of year $ 3,859 $ 3,594 $ 353 $ 359 $ — $ — Amended Plans2009,2011, we modified retiree medical benefits for certain retirees, as part of our effort to provide consistent benefits to all U.S. employees. These modifications resulted in a decrease in our postretirement benefit obligation of $113 million with a corresponding offset to other comprehensive income, net of tax.F-50NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)On August 28, 2009, we announced the closure of our manufacturing facility in Evansville, Indiana in mid-2010. The announcement triggered a curtailment within our pension plan for Evansville hourly employees, resulting in a one-time curtailment loss of $6.6 million included in net periodic cost with an offset to other comprehensive income, net of tax. During the September 2009 quarter, we recorded the entire loss in our Consolidated Statement of Income as a component of cost of products sold.On June 16, 2009, the Board of Directors authorized the option for the company to use up to $100 million of company stock to fund the U.S. pension plans. If we elect to partially fund the U.S. pension plans in company stock, contributions may be made on a periodic basis from treasury stock, or, with the prior approval of the Finance Committee of the Board of Directors, from authorized, but unissued shares. As of December 31, 2009, we have not used company stock to fund our U.S. pension plans.On February 9, 2009, we announced the suspension of the annual credit to retiree health savings accounts for the majority of active participants. The result of the indefinite suspension was a one-time curtailment gain of $89 million included in net periodic cost with an offset to other comprehensive income, net of tax. During the March 2009 quarter, we recorded $80 million of this gain in our Consolidated Statement of Income as a component of cost of products sold and $9 million was recorded as a component of selling, general and administrative expenses.On August 1, 2008, certain retiree medical benefits for the retirees and remaining active participants associated with our Newton, Iowa manufacturing facility were amended (Newton Amendment), effective January 1, 2009,2013, to be consistent with those benefits provided by the Whirlpool Corporation Group Benefit Plan. The result of thisPlan. We accounted for these changes as a plan amendment, wasresulting in a reduction in the postretirement benefit obligation of $229$148 million with a corresponding increasean offset to accumulated other comprehensive income,loss, net of tax.In conjunction with the Newton Amendment, we initiated legal proceedings with certain retirees and the United Automobile, Aerospace, and Agricultural Implement Workers of America to seek a declaratory judgment that Whirlpool has the right to change retiree medical benefits after July 31, 2008, the expiration date of the collective bargaining agreement. In response, a similar group of retirees has initiated legal proceedings against Whirlpool asserting the above benefits are vested. We believe the outcome of the legal proceedings against Whirlpool will not have a material adverse effect on our Consolidated Financial Statements.The U.S. heritage Whirlpool and Maytag pension plans were amended to cease benefit accruals for the majority of salaried and non-union participants effective December 31, 2006. For heritage Whirlpool salaried employees who are eligible to retire before January 1, 2010, the plan freeze was effective December 31, 2009. An enhanced defined contribution plan is being provided to affected employees subsequent to the plan freeze.401(k) Defined Contribution PlanDuring the March 2009 quarter we announced the suspension of company matching contributions for our 401(k) defined contribution plan covering substantially all U.S. employees. We also announced that our automatic company contributions equal to 3% of employees’ eligible pay will be contributed in company stock. Our contributions amounted to the following amounts: 2009 2008 2007 $ 40 $ 70 $ 68 During the December 2009 quarter we announced the reinstatement of company matching contributions for our 401(k) defined contribution plan covering substantially all U.S. employees, effective March 2010.F-51NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)Obligations and Funded Status at End of Year U.S. Pension Benefits Foreign Pension
Benefits Other
Postretirement
Benefits 2009 2008 2009 2008 2009 2008 $ 2,273 $ 2,212 $ 179 $ 156 $ — $ — 3,637 3,547 383 342 761 904 $ (1,364 ) $ (1,335 ) $ (204 ) $ (186 ) $ (761 ) $ (904 ) $ — $ — $ 7 $ 3 $ — $ — (6 ) (12 ) (12 ) (7 ) (68 ) (82 ) (1,358 ) (1,323 ) (199 ) (182 ) (693 ) (822 ) $ (1,364 ) $ (1,335 ) $ (204 ) $ (186 ) $ (761 ) $ (904 ) $ 1,305 $ 1,187 $ 54 $ 41 $ 45 $ 75 (29 ) (23 ) 4 4 (276 ) (290 ) — — (1 ) (1 ) 1 1 $ 1,276 $ 1,164 $ 57 $ 44 $ (230 ) $ (214 ) Change in Benefit Obligation U.S. Pension Benefits Foreign Pension
Benefits Other
Postretirement
Benefits 2009 2008 2009 2008 2009 2008 $ 3,547 $ 3,580 $ 342 $ 393 $ 904 $ 1,151 11 14 6 7 11 21 206 211 20 22 48 66 — — 2 2 18 18 190 52 20 (3 ) (2 ) (56 ) (307 ) (305 ) (30 ) (30 ) (88 ) (113 ) — — — — 2 5 — 1 1 — (113 ) (182 ) 2 — — 9 — — 1 — — — — — — — 2 (17 ) (25 ) — (13 ) (6 ) (4 ) (1 ) — — — — 24 (40 ) 6 (6 ) $ 3,637 $ 3,547 $ 383 $ 342 $ 761 $ 904 $ 3,633 $ 3,537 $ 367 $ 326 $ — $ — F-52NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED) U.S. Pension Benefits Foreign Pension Benefits Other
Postretirement
Benefits 2009 2008 2009 2008 2009 2008 $ 2,212 $ 3,062 $ 156 $ 180 $ — $ — 229 (633 ) 17 (15 ) — — 152 94 24 32 70 95 — — 2 2 18 18 (307 ) (305 ) (30 ) (30 ) (88 ) (113 ) — — — 9 — — (13 ) (6 ) (4 ) (1 ) — — — 14 (21 ) — — $ 2,273 $ 2,212 $ 179 $ 156 $ — $ — United States Pension Benefits Foreign Pension Benefits Millions of dollars 2011 2010 2011 2010 2011 2010 Fair value of plan assets, beginning of year $ 2,288 $ 2,273 $ 172 $ 179 $ — $ — Actual return on plan assets 227 266 5 10 — — Employer contribution 303 41 25 26 64 57 Plan participants’ contributions — — 2 2 10 17 Gross benefits paid (245 ) (292 ) (31 ) (45 ) (74 ) (74 ) Settlements — — — (1 ) — — Foreign currency exchange rates — — (3 ) 1 — — Fair value of plan assets, end of year $ 2,573 $ 2,288 $ 170 $ 172 $ — $ — U.S. Pension Benefits Foreign Pension Benefits Other
Postretirement
Benefits 2009 2008 2007 2009 2008 2007 2009 2008 2007 $ 11 $ 14 $ 25 $ 6 $ 7 $ 7 $ 11 $ 21 $ 22 206 211 215 20 22 19 48 66 73 (198 ) (240 ) (251 ) (11 ) (11 ) (10 ) — — — 35 12 16 3 1 1 1 1 4 — — 5 1 1 1 (32 ) (25 ) (13 ) 1 — — — — — — — — 7 1 14 — (7 ) — (95 ) (17 ) — 4 2 — (1 ) — — — — — — — — — — (8 ) — — 1 $ 66 $ — $ 24 $ 18 $ 13 $ 10 $ (67 ) $ 46 $ 87 During Millions of dollars 2011 2010 2009 2011 2010 2009 2011 2010 2009 Service cost $ 2 $ 3 $ 11 $ 7 $ 6 $ 6 $ 8 $ 9 $ 11 Interest cost 192 200 206 20 20 20 31 38 48 Expected return on plan assets (194 ) (190 ) (198 ) (10 ) (11 ) (11 ) — — — Amortization: Actuarial loss 31 30 35 4 2 3 1 1 1 Prior service cost (credit) (3 ) (3 ) — 1 1 1 (43 ) (33 ) (32 ) Special termination benefit — — 1 — — — — — — Curtailment loss (gain) — — 7 — — — (35 ) (62 ) (95 ) Settlement loss (gain) — — 4 2 3 (1 ) — — — Net periodic benefit cost $ 28 $ 40 $ 66 $ 24 $ 21 $ 18 $ (38 ) $ (47 ) $ (67 ) recognized a curtailment loss of $6.6 million in one of our U.S. pension plans related toannounced the announced closure of our manufacturing facility in Evansville, IndianaIndiana. Both closures triggered a curtailment in mid-2010. Additionally,our United States retiree healthcare plan, resulting in curtailment gains of $35 million and $62 million in 2011 and 2010, respectively.gainloss of $89$7 million during 2009 in our U.S. postretirement health carepension plan for Evansville hourly employees. The curtailment gains and loss were recognized in our Consolidated Statement of Income as a resultcomponent of cost of products sold with an offset to accumulated other comprehensive loss, net of tax.During 2008, we recognized The result of the indefinite suspension was a one-time curtailment gain of $7 related included in net periodic cost with an offset to the conversionother comprehensive income, net of our Mexico defined benefit plan to a defined contribution plan. Additionally,tax. During 2009 we recognized a curtailmentrecorded $80 million of this gain of $17 million in our U.S. postretirement health care planConsolidated Statement of Income as a resultcomponent of the reduction in force announced on October 27, 2008. See Note 10 for additional information regarding our restructuring initiatives.During 2007, we recognized curtailment lossescost of $14products sold and related to amendments to cease all benefit accruals in our pension plan for Fort Smith.F-53NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED) was recorded as a component of selling, general and administrative expenses.2009 U.S. Pension
Benefits Foreign Pension
Benefits Other
Postretirement
Benefits $ 157 $ 15 $ (29 ) (39 ) (1 ) (1 ) — 1 (113 ) (7 ) (1 ) 127 $ 111 $ 14 $ (16 ) $ 177 $ 32 $ (83 ) Millions of dollars Current year actuarial (gain) loss $ 285 $ 4 $ (6 ) Actuarial (loss) gain recognized during the year (31 ) (6 ) 2 Current year prior service cost (credit) — — (148 ) Prior service credit (cost) recognized during the year 3 (1 ) 75 Total recognized in other comprehensive income (pre-tax) $ 257 $ (3 ) $ (77 ) Total recognized in net periodic benefit costs and other comprehensive income (pre-tax) $ 285 $ 21 $ (115 ) 2010 U.S. Pension
Benefits Foreign Pension
Benefits Other
Postretirement
Benefits $ 30 $ 2 $ — (3 ) 1 (38 ) $ 27 $ 3 $ (38 ) Millions of dollars Actuarial loss $ 46 $ 3 $ 1 Prior service (credit) cost (3 ) 1 (46 ) Total $ 43 $ 4 $ (45 ) U.S. Pension
Benefits Foreign Pension
Benefits Other
Postretirement
Benefits 2009 2008 2009 2008 2009 2008 5.75 % 6.05 % 2.5-11.9 % 1.5-13.2 % 5.30 % 5.95 % 4.50 % 4.50 % 2.0-7.1 % 2.0-7.1 % — — — — — — 8.00 % 8.00 % — — — — 5.00 % 5.00 % — — — — 5 6 Foreign Pension Benefits 2011 2010 2011 2010 2011 2010 Discount rate 4.80 % 5.60 % 5.00 % 5.20 % 4.80 % 5.55 % Rate of compensation increase 4.50 % 4.50 % 3.50 % 3.50 % — — U.S. Pension Benefits Foreign Pension Benefits Other Postretirement Benefits 2009 2008 2007 2009 2008 2007 2009 2008 2007 6.05 % 6.15 % 5.85 % 1.5-13.2 % 3.5-11.3 % 3.0-11.3 % 5.10/5.95/6.20 % 6.05/6.55 % 5.75/6.15 % 7.75 % 8.25 % 8.50 % 4.0-11.3 % 4.5-11.3 % 4.5-11.3 % — — — 4.50 % 4.50/3.00 % 4.50/3.00 % 2.0-7.1 % 2.0-7.1 % 2.0-7.1 % — — — — — — — — — 8.00 % 8.50 % 9.00 % — — — — — — 5.00 % 5.00 % 5.00 % — — — — — — 6 7 4 F-54 Foreign Pension Benefits Other Postretirement Benefits 2011 2010 2009 2011 2010 2009 2011 2010 2009 Discount rate 5.60 % 5.75 % 6.05 % 5.20 % 5.40 % 5.90 % 5.60 % 5.40 % 5.80 % Expected long-term rate of return on plan assets 7.75 % 7.75 % 7.75 % 5.40 % 5.50 % 5.90 % — — — Rate of compensation increase 4.50 % 4.50 % 4.50 % 3.50 % 3.50 % 3.50 % — — — Health care cost trend rate Initial rate — — — — — — 8.00 % 8.00 % 8.00 % Ultimate rate — — — — — — 5.00 % 5.00 % 5.00 % Year that ultimate rate will be reached — — — — — — 2015 2016 2017 STATEMENTS—STATEMENTS - (CONTINUED)U.S.,United States, the expected rate of return on plan assets was determined by using the historical asset returns for publicly traded equity and fixed income securities tracked from 1927 through 20092011 and the historical returns for private equity. The historical equity returns were adjusted downward to reflect future expectations. This adjustment was based on published academic research. The expected returns are weighted by the targeted asset allocations. The resulting weighted-average return was rounded to the nearest quarter of one percent.Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. effects: One Percentage
Point Increase One Percentage
Point Decrease $ 3 $ (3 ) 35 (31 ) Millions of dollars Effect on total of service and interest cost $ 2 $ (1 ) Effect on postretirement benefit obligations 10 (9 ) U.S.United States pension plans amounts sufficient to meet the minimum funding requirement as defined by employee benefit and tax laws, plus additional amounts which we may determine to be appropriate. In certain countries other than the U.S.,United States, the funding of pension plans is not common practice. We have several unfunded non-U.S.Contributions to our United States pension plans.plans may be made in the form of cash or company stock. We pay for retiree medical benefits as they are incurred. U.S. Pension
Benefits(1) Foreign Pension
Benefits(2) $ 35 $ 6 Millions of dollars 2012 $ 220 $ 11 (1)Represents discretionaryContributions include $180 million of minimum contributions to our funded U.S. pension plans.required by law.(2)Represents required contributions to our funded foreign pension plans.Contributions to both our U.S. and foreign pension plans can be made in cash or company stock.Expected Benefit Payments U.S. Pension
Benefits Foreign Pension
Benefits Other
Postretirement
Benefits Gross Expected Federal
Subsidy $ 307 $ 25 $ 70 $ (2 ) 262 19 75 (1 ) 260 23 75 (2 ) 260 21 75 (2 ) 256 25 72 (2 ) 1,285 137 315 (11 ) F-55STATEMENTS—STATEMENTS - (CONTINUED)Millions of dollars Foreign Pension Benefits Other Postretirement Benefits 2012 $ 307 $ 22 $ 58 2013 266 20 51 2014 261 24 50 2015 258 22 48 2016 264 22 44 2017-2021 1,278 130 177 60%50% equity and 40%50% fixed income, with exceptions for certain foreign pension plans. Of the target allocation for equity securities, approximately 50% is allocated to U.S.United States large-cap, 30% to international equity, 13% to U.S.United States mid and small-cap companies and 7% in venture capital). The target allocation for fixed income is allocated evenly with 50%75% to corporate bonds and 50%25% to U.S.United States treasury and other government securities. The fixed income securities duration is intended to match that of our U.S.United States pension liabilities.2009,2011 and 2010, by asset category arewere as follows: December 31, 2009 Quoted prices
(Level 1) Other significant
observable inputs
(Level 2) Significant
unobservable inputs
(Level 3) Total $ 105 $ — $ — $ 105 187 — — 187 45 216 — 261 104 — — 104 — 712 — 712 — 333 — 333 — 404 — 404 — 51 — 51 — 110 — 110 — — 153 153 — 7 — 7 — 25 — 25 $ 441 $ 1,858 $ 153 $ 2,452 December 31, Millions of dollars Total 2011 2010 2011 2010 2011 2010 2011 2010 Cash and cash equivalents $ 1 $ 6 $ — $ — $ — $ 1 $ 6 U.S. securities — — 432 394 — — 432 394 International securities — — 50 17 — — 50 17 U.S. companies — — 692 387 — — 692 387 International companies — — 212 131 — — 212 131 U.S. companies 181 215 — — — — 181 215 International companies 57 79 — — — — 57 79 90 118 — — — — 90 118 U.S. equity securities — — 517 555 — — 517 555 International equity securities — — 245 319 — — 245 319 Short-term investment fund — — 52 34 — — 52 34 U.S. private equity investments — — — — 137 116 137 116 Diversified fund of funds — — — — 42 41 42 41 Emerging growth — — — — 14 17 14 17 — — 10 9 — — 10 9 All other investments — — 11 22 — — 11 22 $ 329 $ 418 $ 2,221 $ 1,868 $ 193 $ 174 $ 2,743 $ 2,460 (a) Valued using pricing vendors who use proprietary models to estimate the price a dealer would pay to buy a security using significant observable inputs, such as interest rates, yield curves, and credit risk. (b) Valued using the closing stock price on a national securities exchange, which reflects the last reported sales price on the last business day of the year. (c) Valued using the net asset value (NAV) of the fund, which is based on the fair value of underlying securities. The fund primarily invests in a diversified portfolio of equity securities issued by non-U.S. companies. (b)(d) Eighty percentValued using the NAV of the common and collective funds are invested in an equity index fund, which tracksis based on the S&P 500. Twenty percentfair value of underlying securities.(e) Valued at estimated fair value based on the proportionate share of the Plan’s common and collectivelimited partnerships fair value, as determined by the general partner.(f) Valued using the NAV of the fund, investments are invested in international equitywhich is based on the fair value of underlying securities.(c)Primarily invested in diversified fund of funds and generally focused on buyouts, venture capital and private equity investments. Limited
Partnerships $ 159 (1 ) (16 ) 11 $ 153 F-56NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)Millions of dollars Balance, December 31, 2010 $ 174 Realized gains 11 Unrealized gains 20 Purchases 21 Settlements (33 ) Balance, December 31, 2011 $ 193 PBOprojected benefit obligation and fair value of plan assets for pension plans with a PBOprojected benefit obligation in excess of plan assets at December 31, 20092011 and 20082010 were as follows: U.S. Pension Benefits Foreign Pension Benefits 2009 2008 2009 2008 $ 3,637 $ 3,547 $ 307 $ 275 2,273 2,212 96 85 Foreign Pension Benefits Millions of dollars 2011 2010 2011 2010 Projected benefit obligation $ 3,872 $ 3,605 $ 297 $ 276 Fair value of plan assets 2,573 2,288 89 53 PBO, ABOprojected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an ABOaccumulated benefit obligation in excess of plan assets at December 31, 20092011 and 20082010 were as follows: U.S. Pension Benefits Foreign Pension Benefits 2009 2008 2009 2008 $ 3,637 $ 3,547 $ 299 $ 213 3,633 3,537 288 204 2,273 2,212 89 27 (13) OPERATING SEGMENT INFORMATION Foreign Pension Benefits Millions of dollars �� 2011 2010 2011 2010 Projected benefit obligation $ 3,872 $ 3,605 $ 253 $ 253 Accumulated benefit obligation 3,859 3,594 241 244 Fair value of plan assets 2,573 2,288 48 45 (13) OPERATING SEGMENT INFORMATION minoritynoncontrolling interests and restructuring costs. Total assets by segment are those assets directly associated with the respective operating activities. The “Other/Eliminations” column primarily includes corporate expenses, assets and eliminations, as well as all other restructuring and discontinued operations.expenses. Intersegment sales are eliminated within each region with the exception ofexcept compressor sales out of Latin America, which are included in Other/Eliminations.10%$1.4 billion, 11%$1.5 billion and 12%$1.7 billion of consolidated net sales in 2009, 2008,2011, 2010 and 2007,2009, respectively. Related receivables were 11% and 13% of consolidated trade receivables as of December 31, 2009 and 2008, respectively.and/or totallong-lived assets within the last three years. The United States represented 48%, 48%, 53% offollowing table summarizes net sales for 2009, 2008, and 2007, respectively, while Brazil totaled 15%, 13%, 12% for 2009, 2008, and 2007, respectively. As a percentage of totallong-lived assets the United States accounted for 53%, and 51% at the end of 2009 and 2008, respectively. Brazil accounted for 12% and 10% of total assets at the end of 2009 and 2008, respectively.Millions of dollars United States Brazil Total 2011: Sales to external customers $ 8,035 $ 3,133 $ 7,498 $ 18,666 Long-lived assets 4,464 405 1,717 6,586 2010: Sales to external customers $ 8,221 $ 3,290 $ 6,855 $ 18,366 Long-lived assets 4,431 459 1,764 6,654 2009: Sales to external customers $ 8,174 $ 2,530 $ 6,395 $ 17,099 Long-lived assets 4,443 437 1,762 6,642 For 2009, the operating segments recorded total restructuring costs (See Note 10) as follows: North America—$35 million, Europe—$74 million, Latin America—$5 million, Asia—$10 million and Corporate—$2 million, for a total of $126 million. For 2008, the operating segments recorded total restructuring costs as follows: NorthF-57 OPERATING SEGMENTS EMEA Asia Net sales 2011 $ 9,582 $ 5,062 $ 3,305 $ 881 $ (164 ) $ 18,666 2010 9,784 4,694 3,227 855 (194 ) 18,366 2009 9,592 3,705 3,338 654 (190 ) 17,099 Intersegment sales 2011 $ 216 $ 187 $ 167 $ 217 $ (787 ) $ — 2010 201 233 257 197 (888 ) — 2009 142 237 339 169 (887 ) — Depreciation and amortization 2011 $ 290 $ 101 $ 110 $ 21 $ 36 $ 558 2010 297 92 107 20 39 555 2009 280 77 107 18 43 525 Restructuring costs 2011 $ 92 $ 3 $ 39 $ 1 $ 1 $ 136 2010 42 2 28 — 2 74 2009 35 5 74 10 2 126 Operating profit (loss) 2011 $ 398 $ 642 $ 1 $ 30 $ (279 ) $ 792 2010 461 668 102 34 (257 ) 1,008 2009 560 363 21 30 (286 ) 688 Total assets 2011 $ 7,894 $ 3,620 $ 2,839 $ 797 $ 31 $ 15,181 2010 8,163 3,618 3,144 775 (116 ) 15,584 2009 8,123 2,887 3,216 690 178 15,094 Capital expenditures 2011 $ 316 $ 112 $ 103 $ 27 $ 50 $ 608 2010 330 108 98 22 35 593 2009 276 78 116 13 58 541 STATEMENTS—STATEMENTS - (CONTINUED)America—$56 million, Europe—$78 million, Latin America—$7 million, Asia—$2 million and Corporate—$6 million for a total of $149 million. For 2007, the operating segments recorded total restructuring costs as follows: North America—$13 million, Europe—$28 million, Latin America—$20 million, for a total of $61 million.As disclosed in Note 1, during the March 2009 quarter, we changed our method of depreciation prospectively for substantially all long-lived production machinery and equipment to a modified units of production depreciation method. Under this method, we record depreciation based on units produced, unless units produced drop below a minimum threshold at which point depreciation is then recorded using the straight-line method. Prior to 2009, all machinery and equipment was depreciated using the straight-line method. We believe depreciating machinery and equipment based on units of production is a preferable method as it best matches the usage of assets with the revenues derived from those assets. As a result, our depreciation expense by operating segment decreased for 2009 as follows: North America—$46 million, Europe—$25 million Latin America—$11 million and Asia—$1 million, for a total of $83 million. Net of amounts capitalized into ending inventories, operating profit increased for 2009 as follows: North America—$41 million, Europe—$19 million, Latin America—$11 million and Asia—$1, for a total of $72 million. OPERATING SEGMENTS North
America Europe Latin
America Asia Other/
Eliminations Total
Whirlpool $ 9,592 $ 3,338 $ 3,705 $ 654 $ (190 ) $ 17,099 10,781 4,016 3,704 593 (187 ) 18,907 11,735 3,848 3,437 557 (169 ) 19,408 $ 142 $ 339 $ 237 $ 169 $ (887 ) $ — 148 336 219 161 (864 ) — 171 504 169 220 (1,064 ) — $ 280 $ 107 $ 77 $ 18 $ 43 $ 525 329 131 96 22 19 597 352 115 84 22 20 593 $ 560 $ 21 $ 363 $ 30 $ (286 ) $ 688 199 149 478 10 (287 ) 549 646 246 438 (6 ) (261 ) 1,063 $ 8,123 $ 3,216 $ 2,887 $ 690 $ 178 $ 15,094 8,038 3,592 2,094 639 (831 ) 13,532 8,107 3,394 2,615 689 (796 ) 14,009 $ 276 $ 116 $ 78 $ 13 $ 58 $ 541 253 156 100 21 17 547 251 144 110 20 11 536 F-58NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED) Three months ended Dec. 31 Sept. 30 Jun. 30 Mar. 31 $ 4,864 $ 4,497 $ 4,169 $ 3,569 4,176 3,877 3,615 3,045 95 87 78 68 1.26 1.17 1.05 0.92 1.24 1.15 1.04 0.91 0.43 0.43 0.43 0.43 Three months ended Dec. 31 Sept. 30 Jun. 30 Mar. 31 $ 4,315 $ 4,902 $ 5,076 $ 4,614 3,842 4,217 4,324 4,000 44 163 117 94 0.60 2.18 1.55 1.23 0.60 2.15 1.53 1.22 0.43 0.43 0.43 0.43 As described in Note 1, during the March 2009 quarter, we changed our method of depreciation prospectively for substantially all long-lived production machinery and equipment to a modified units of production depreciation method. As a result of this change in method, net of amounts capitalized into ending inventories, gross margin increased by $8, $24, $21, and $19 for the March, June, September and December 2009 quarters, respectively. Three months ended Millions of dollars, except per share data Dec. 31 Sept. 30 Jun. 30 Mar. 31 2011 2010 2011 2010 2011 2010 2011 2010 Net sales $ 4,910 $ 5,041 $ 4,625 $ 4,519 $ 4,730 $ 4,534 $ 4,401 $ 4,272 Cost of products sold 4,198 4,375 4,052 3,871 4,061 3,773 3,778 3,633 Net earnings (loss) 213 178 181 83 (164 ) 215 178 174 Net earnings (loss) available to Whirlpool 205 171 177 79 (161 ) 205 169 164 Basic net earnings (loss) 2.66 2.23 2.31 1.04 (2.10 ) 2.69 2.21 2.17 Diluted net earnings (loss) 2.62 2.19 2.27 1.02 (2.10 ) 2.64 2.17 2.13 Dividends 0.50 0.43 0.50 0.43 0.50 0.43 0.43 0.43 High $ 62.00 $ 91.28 $ 82.99 $ 96.90 $ 92.00 $ 118.44 $ 92.28 $ 91.11 Low 45.22 72.95 47.35 71.00 72.48 86.86 79.15 73.30 Close 47.45 88.83 49.91 80.96 81.32 87.82 85.36 87.25