SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002.
Commission file number 1-3932
WHIRLPOOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-1490038
(State of incorporation) (I.R.S. Employer Identification No.)
2000 M-63
Benton Harbor, Michigan 49022-2692
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 269/923-5000
The registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
Yes ____X____ No ________
Number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date:
Class of common stock Shares outstanding at September 30, 2002
--------------------- ----------------------------------------
Common stock, par value $1 per share 68,198,204
QUARTERLY REPORT ON FORM 10-Q
WHIRLPOOL CORPORATION
Quarter Ended September 30, 2002
INDEX OF INFORMATION INCLUDED IN REPORT
Page
----
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Statements
of Earnings 3
Consolidated Condensed Balance Sheets 4
Consolidated Condensed Statements
of Changes in Equity 5
Consolidated Condensed Statements
of Cash Flows 6
Notes to Consolidated Condensed
Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 17
Item 3. Quantitative and Qualitative Disclosure
About Market Risk 25
Item 4. Evaluation of Disclosure Controls and
Procedures 25
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 26
2
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
WHIRLPOOL CORPORATION
FOR THE PERIOD ENDED SEPTEMBER 30
(millions of dollars except share and dividend data)
Three Months Ended Nine Months Ended
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net sales $ 2,759 $ 2,594 $ 8,070 $ 7,695
EXPENSES:
Cost of products sold 2,114 1,988 6,198 5,936
Selling and administrative 442 392 1,280 1,203
Intangible amortization 1 7 4 20
Product recall costs - 300 - 300
Restructuring costs 3 5 17 67
-------- -------- -------- --------
2,560 2,692 7,499 7,526
-------- -------- -------- --------
OPERATING PROFIT (LOSS) 199 (98) 571 169
OTHER INCOME (EXPENSE):
Interest income and sundry income (expense) - (15) (31) (26)
Interest expense (39) (41) (108) (128)
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND OTHER ITEMS 160 (154) 432 15
Income taxes 56 (64) 151 (3)
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE EQUITY EARNINGS
AND MINORITY INTERESTS 104 (90) 281 18
Equity in earnings (loss) of affiliated companies - (1) (25) 2
Minority interests (3) (3) (7) (7)
-------- -------- -------- --------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 101 (94) 249 13
Loss from discontinued operations, net of tax - - - (21)
Cumulative effect of change in accounting principle, net of tax - - (613) 8
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 101 $ (94) $ (364) $ -
======== ======== ======== ========
Per share of common stock:
Basic earnings (loss) from continuing operations $ 1.48 $ (1.40) $ 3.67 $ .20
Loss from discontinued operations, net of tax - - - (.32)
Cumulative effect of change in accounting principle, net of tax - - (9.04) .12
-------- -------- -------- --------
Basic net earnings (loss) $ 1.48 $ (1.40) $ (5.37) $ -
======== ======== ======== ========
Diluted earnings (loss) from continuing operations $ 1.46 $ (1.40) $ 3.67 $ .20
Loss from discontinued operations, net of tax - - - (.32)
Cumulative effect of change in accounting principle, net of tax - - (9.04) .12
-------- -------- -------- --------
Diluted net earnings (loss) $ 1.46 $ (1.40) $ (5.37) $ -
======== ======== ======== ========
Dividends declared $ .34 $ .34 $ 1.02 $ 1.02
======== ======== ======== ========
Weighted-average shares outstanding (millions):
Basic 68.2 67.0 67.8 66.6
Fully diluted 69.0 67.0 67.8 67.8
See notes to consolidated condensed financial statements.
3
CONSOLIDATED CONDENSED BALANCE SHEETS
WHIRLPOOL CORPORATION
(millions of dollars)
(Unaudited)
September 30 December 31
2002 2001
-------------- -------------
ASSETS
Current Assets
- --------------
Cash and equivalents $ 183 $ 316
Trade receivables, less allowances of
(2002: $86; 2001: $93) 1,772 1,515
Inventories 1,137 1,110
Prepaid expenses 86 59
Deferred income taxes 58 176
Other current assets 132 135
-------------- -------------
Total Current Assets 3,368 3,311
-------------- -------------
Other Assets
- ------------
Investment in affiliated companies 11 117
Goodwill, net 129 685
Deferred income taxes 314 354
Prepaid pension costs 234 208
Other 247 240
-------------- -------------
935 1,604
-------------- -------------
Property, Plant and Equipment
- -----------------------------
Land 74 56
Buildings 910 886
Machinery and equipment 4,626 4,372
Accumulated depreciation (3,425) (3,262)
-------------- -------------
2,185 2,052
-------------- -------------
Total Assets $ 6,488 $ 6,967
============== =============
(Unaudited)
September 30 December 31
2002 2001
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Notes payable $ 518 $ 148
Accounts payable 1,391 1,427
Employee compensation 243 252
Deferred income taxes 125 102
Accrued expenses 651 623
Restructuring costs 65 77
Accrued product recalls 5 239
Other current liabilities 121 195
Current maturities of long-term debt 209 19
-------------- -------------
Total Current Liabilities 3,328 3,082
-------------- -------------
Other Liabilities
- -----------------
Deferred income taxes 198 177
Postemployment benefits 653 623
Product warranty 60 45
Other liabilities 213 160
Long-term debt 1,085 1,295
-------------- -------------
2,209 2,300
-------------- -------------
Minority Interests 76 127
Stockholders' Equity
- --------------------
Common stock 87 86
Paid-in capital 565 480
Retained earnings 2,037 2,470
Accumulated other comprehensive income (loss) (898) (697)
Treasury stock - at cost (916) (881)
-------------- -------------
Total Stockholders' Equity 875 1,458
-------------- -------------
Total Liabilities and Stockholders' Equity $ 6,488 $ 6,967
============== =============
See notes to consolidated condensed financial statements.
4
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
WHIRLPOOL CORPORATION
FOR THE PERIODS ENDED SEPTEMBER 30
(millions of dollars)
Three Months Ended
--------------------------------------------------------------------
Accumulated Treasury
Other Stock /
Retained Comprehensive Common Paid-in-
Total Earnings Income (Loss) Stock Capital
----------- ----------- ----------------- --------- --------
Beginning balance $ 1,568 $ 2,588 $ (684) $ 84 $ (420)
Comprehensive income (loss)
Net loss (94) (94)
Unrealized loss on derivative instruments 5 5
Other, principally foreign currency items (19) (19)
----------- -----------------
Comprehensive loss (108) (14)
----------- -----------------
Common stock issued, net of treasury shares 6 1 5
Dividends declared on common stock (23) (23)
----------- ----------- ----------------- --------- --------
Ending balance, September 30, 2001 $ 1,443 $ 2,471 $ (698) $ 85 $ (415)
=========== =========== ================= ========= ========
Accumulated Treasury
Other Stock /
Retained Comprehensive Common Paid-in-
Total Earnings Income Stock Capital
----------- ----------- ----------------- --------- --------
Beginning balance $ 877 $ 1,959 $ (816) $ 87 $ (353)
Comprehensive income (loss)
Net income (loss) 101 101
Unrealized loss on derivative instruments (1) (1)
Other, principally foreign currency items (81) (81)
----------- -----------------
Comprehensive income (loss) 19 (82)
----------- -----------------
Treasury shares purchased, net of shares issued
Common stock issued under stock plans 2 2
Dividends declared on common stock (23) (23)
----------- ----------- ----------------- --------- --------
Ending balance, September 30, 2002 $ 875 $ 2,037 $ (898) $ 87 $ (351)
=========== =========== ================= ========= ========
Nine Months Ended
--------------------------------------------------------------------
Accumulated Treasury
Other Stock /
Retained Comprehensive Common Paid-in-
Total Earnings Income (Loss) Stock Capital
----------- ----------- ----------------- --------- --------
Beginning balance $ 1,684 $ 2,539 $ (495) $ 84 $ (444)
Comprehensive income (loss)
Net loss - -
Cumulative effect of change in accounting
Principle, net of tax (11) (11)
Unrealized loss on derivative instruments (1) (1)
Other, principally foreign currency items (191) (191)
----------- -----------------
Comprehensive loss (203) (203)
----------- -----------------
Common stock issued, net of treasury shares 30 1 29
Dividends declared on common stock (68) (68)
----------- ----------- ----------------- --------- --------
Ending balance, September 30, 2001 $ 1,443 $ 2,471 $ (698) $ 85 $ (415)
=========== =========== ================= ========= ========
Accumulated Treasury
Other Stock /
Retained Comprehensive Common Paid-in-
Total Earnings Income Stock Capital
----------- ----------- ----------------- --------- --------
Beginning balance $ 1,458 $ 2,470 $ (697) $ 86 $ (401)
Comprehensive income (loss)
Net income (loss) (364) (364)
Unrealized loss on derivative instruments (4) (4)
Other, principally foreign currency items (197) (197)
----------- -----------------
Comprehensive income (loss) (565) (201)
----------- -----------------
Treasury shares purchased, net of shares issued (35) (35)
Common stock issued under stock plans 86 1 85
Dividends declared on common stock (69) (69)
----------- ----------- ----------------- --------- --------
Ending balance, September 30, 2002 $ 875 $ 2,037 $ (898) $ 87 $ (351)
=========== =========== ================= ========= ========
See notes to consolidated condensed financial statements.
5
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
WHIRLPOOL CORPORATION
FOR NINE MONTHS ENDED SEPTEMBER 30
(millions of dollars)
2002 2001
-------------- --------------
OPERATING ACTIVITIES
Net earnings (loss) $ (364) $ -
Cumulative effect of a change in accounting principle 613 (8)
Equity in net earnings of affiliated companies,
less dividends received 25 (2)
Loss on disposition of assets 16 26
Loss on discontinued operations - 21
Depreciation and amortization 291 297
Changes in assets and liabilities, net of business acquisitions:
Trade receivables (120) (39)
Inventories 29 3
Accounts payable (132) 77
Product recalls (234) 300
Restructuring charges, net of cash paid (25) 13
Taxes deferred and payable, net 150 (40)
Tax paid on cross currency interest rate swap gain (86) -
Other - net 72 (1)
-------------- --------------
Cash Provided By Operating Activities $ 235 $ 647
-------------- --------------
INVESTING ACTIVITIES
Net additions to properties $ (205) $ (196)
Acquisitions of businesses, less cash acquired (175) -
-------------- --------------
Cash Used In Investing Activities $ (380) $ (196)
-------------- --------------
FINANCING ACTIVITIES
Net proceeds (repayments) of short-term borrowings $ 171 $ (558)
Proceeds of long-term debt 16 279
Repayments of long-term debt (50) (42)
Dividends paid (69) (90)
Purchase of treasury stock (46) (43)
Redemption of WFC preferred stock (25) -
Common stock issued under stock plans 82 87
Other (76) (40)
-------------- --------------
Cash Provided By (Used In) Financing Activities $ 3 $ (407)
-------------- --------------
Effect of Exchange Rate Changes on Cash and Equivalents $ 9 $ (1)
-------------- --------------
Increase (Decrease) in Cash and Equivalents $ (133) $ 43
Cash and Equivalents at Beginning of Period 316 114
-------------- --------------
Cash and Equivalents at End of Period $ 183 $ 157
============== ==============
See notes to consolidated condensed financial statements.
6
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF PRINCIPAL
ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial statements present
information in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and applicable
rules of Regulation S-X. Accordingly, they do not include all information or
footnotes required by generally accepted accounting principles for complete
financial statements. Management believes the financial statements include all
normal recurring accrual adjustments necessary for a fair presentation.
Operating results for the three and nine months ended September 30, 2002 do not
necessarily indicate the results that may be expected for the full year. For
further information, refer to the consolidated financial statements and notes
thereto included in the company's annual report for the year ended December 31,
2001.
Certain amounts in the prior period financial statements have been reclassified
to conform with the current period presentation.
Diluted net earnings per share of common stock include the dilutive effect of
stock options. Approximately 2,248,000 stock options were excluded from the
current quarter's earnings per diluted share calculation because their exercise
prices rendered them anti-dilutive to this calculation. No options were
considered to be dilutive to the year-to-date results as those results reflect a
net loss after recognition of the cumulative effect of change in accounting
principle.
NOTE B--ACQUISITIONS
Vitromatic:
On July 3, 2002, the company acquired the remaining 51% ownership in Vitromatic
S.A. de C.V. (Vitromatic), an appliance manufacturer and distributor in Mexico.
Prior to that time the company's 49% ownership in Vitromatic was accounted for
as an equity investment. Vitromatic, with annual sales of approximately $400
million, has been included in the consolidated financial statements within the
North America operating segment as of the acquisition date. The results of
Vitromatic's operations did not have a material impact on the current periods'
results.
The aggregate purchase price was $148 million in cash plus outstanding debt at
the time of acquisition, which totaled $143 million.
7
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The transaction resulted in goodwill of approximately $57 million and is
expected to result in additional synergies and operational benefits. The
transaction also generated approximately $15 million in indefinite lived
intangible assets related to trademarks owned by the acquired entity.
The Vitromatic balance sheet has been included in Whirlpool's consolidated
condensed balance sheet at September 30, 2002. The unaudited Vitromatic opening
balance sheet is summarized (in millions) as follows:
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
Current Assets Current Liabilities
- -------------- -------------------
Trade receivables, net $ 131 Accounts payable $ 96
Inventories 60 Notes payable 132
Other current assets 15 Other current liabilities 18
------ ------
Total Current Assets 206 Total Current Liabilities 246
------ ------
Other Liabilities
-----------------
Other Assets 71 Other liabilities 39
Long-term debt 11
------
Property, Plant and Equipment, net 248 Total 50
------ ------
Total Stockholders' Equity 229
------
Total Liabilities and
Total Assets $ 525 Stockholders' Equity $ 525
====== ======
Polar:
On June 5, 2002, the company acquired 95% of the shares of Polar S.A. (Polar), a
leading major home appliance manufacturer in Poland. The results of Polar's
operations have been included in the consolidated financial statements since
that date; however, they did not have a material impact on the current periods'
results or financial position.
The aggregate purchase price was $27 million in cash plus outstanding debt at
the time of acquisition, which totaled $19 million. The operations of Polar have
been included in the company's European operating segment.
8
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE C--NEW ACCOUNTING STANDARDS
The company adopted the non-amortization provisions of Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," on
January 1, 2002, which has resulted in a $6 million increase in the third
quarter's net earnings and a $17 million increase to the first nine months' net
earnings. The non-amortization requirement of the Statement is expected to
increase full-year net earnings by approximately $24 million.
The following table provides comparative earnings and earnings per share had the
non-amortization provisions of SFAS No. 142 been adopted for all periods
presented:
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
(millions of dollars, except per share data) 2002 2001 2002 2001
------------ ------------ ------------ ------------
Reported net earnings (loss) $ 101 $ (94) $ (364) $ -
Goodwill amortization - 6 - 17
------------ ------------ ------------ ------------
Adjusted net earnings (loss) $ 101 $ (88) $ (364) $ 17
============ ============ ============ ============
Basic earnings per share:
Reported net earnings (loss) $ 1.48 $ (1.40) $ (5.37) $ -
Goodwill amortization - .08 - .26
------------ ------------ ------------ ------------
Adjusted net earnings (loss) $ 1.48 $ (1.32) $ (5.37) $ .26
============ ============ ============ ============
Diluted earnings per share:
Reported net earnings (loss) $ 1.46 $ (1.40) $ (5.37) $ -
Goodwill amortization - .08 - .25
------------ ------------ ------------ ------------
Adjusted net earnings (loss) $ 1.46 $ (1.32) $ (5.37) $ .25
============ ============ ============ ============
As an additional step in the SFAS 142 implementation process, there is a
transitional period from the effective date of adoption for the company to
perform an initial assessment of its reporting units to determine whether there
is any indication that the goodwill carrying value may be impaired. This
assessment is made by comparing the fair value of each reporting unit, as
determined in accordance with the new rule, to its book value. To the extent
that impairment is indicated (fair value is less than book value), companies
must determine the amount of goodwill impairment within individual reporting
units. Any impairment charge resulting from the adoption of SFAS No. 142 is
recorded as a cumulative effect of a change in accounting principle retroactive
to January 1, 2002. In future years, a goodwill impairment review must be
conducted at least annually at the reporting unit level, and any such impairment
recorded as a charge to operating earnings.
9
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The company completed its transitional goodwill impairment review of its
reporting units during the second quarter and recorded a non-cash after-tax
charge of $613 million or $8.84 per share. This charge has been recorded as a
cumulative effect of a change in accounting principle retroactive to January 1,
2002 and therefore reduced the previously reported first quarter 2002 net
earnings of $1.21 per diluted share to a net loss of $7.63 per diluted share.
The following table summarizes the impairment charges by reporting segment as
well as the changes in the carrying amount of goodwill for the period ended
September 30, 2002:
(millions of dollars)
Goodwill Impairment Goodwill
Reporting Segment at 1/1/02 Charge Acquisitions * at 9/30/02
- ---------------------------- ----------- ------------ ---------------- ------------
North America $ 68 $ - $ 57 $ 125
Europe 367 (367) - -
Latin America 64 (60) - 4
Asia 186 (186) - -
------- ------- ------ ------
Total $ 685 $ (613) $ 57 $ 129
======= ======= ====== ======
* See note B for additional information.
The goodwill in Europe was related primarily to the company's acquisition in
1989 (53%) and 1991 (47%) of the major appliance business of Philips Electronics
N.V. The Latin American goodwill was mainly generated by the company's majority
ownership expansion in 1997 of its Brazilian affiliates. Within the Asian
business segment, the majority of goodwill arose in 1995 due to the acquisition
of a majority interest in Kelvinator of India, Ltd. and expansion into China.
The company determined the fair value of each reporting unit using a discounted
cash flow approach taking into consideration projections based on the individual
characteristics of the reporting units, historical trends and market multiples
for comparable businesses. The resulting impairment was primarily attributable
to a change in the evaluation criteria for goodwill utilized under previous
accounting guidance, to the fair value approach stipulated in SFAS No. 142.
External factors such as increased regional competition and global economic
conditions also negatively impacted the value of these acquisitions.
10
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
As of September 30, 2002, the company had $36 million of indefinite-lived
intangible assets (trademarks). The company also had $6 million of other
intangible assets that will continue to be amortized over their remaining useful
lives ranging from 15 to 25 months. These other intangible asset amounts are
included in Other Assets in the company's balance sheets.
On January 1, 2002, the company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." There was no impact to the
company's operating results or financial position related to the adoption of
this standard.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial
accounting for and reporting of costs and obligations associated with the
retirement of tangible long-lived assets. This statement will become effective
for the company on January 1, 2003. The company has not yet determined the
effect the adoption of this standard will have on its consolidated financial
position or its results of operations.
On January 1, 2001, the company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No.
138. The company recorded the effect of the transition to these new accounting
requirements as a change in accounting principle. The transition adjustment to
adopt SFAS No. 133 resulted in $8 million of income, net of tax, from the
cumulative effect of a change in accounting principle, and an $11 million
decrease, net of tax, in stockholders' equity in the company's financial
statements for the quarter ended March 31, 2001.
NOTE D--DISCONTINUED OPERATIONS
During the second quarter of 2001, the company wrote off one of its investments
in a securitized aircraft lease portfolio that was owned by the company's
previously discontinued finance company, Whirlpool Financial Corporation (WFC).
The write-off, due primarily to the softening aircraft leasing industry,
resulted in a pre-tax loss from discontinued operations of $35 million ($21
million after-tax).
During the third quarter of 2002, the company disclosed that continuing airline
industry problems had the potential to reduce the value of a portion of WFC's
$96 million in aircraft lease assets. Specifically at risk are $68 million of
assets leased by United Airlines. Presently, all lease payments are current and
the company cannot determine the effect continuing problems may have on the
value of these assets but it continues to monitor the situation closely.
11
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E --INVENTORIES
Inventories consist of the following:
September 30 December 31
2002 2001
-------------- -------------
(millions of dollars)
Finished products $ 1,014 $ 949
Raw materials and work in process 259 297
--------- --------
Total FIFO cost 1,273 1,246
Less excess of FIFO cost
over LIFO cost 136 136
--------- --------
$ 1,137 $ 1,110
========= ========
NOTE F--RESTRUCTURING AND RELATED CHARGES
Restructuring
The current year-to-date results include $17 million pre-tax in restructuring
charges primarily for termination costs. As of September 30, 2002, approximately
900 additional employees had left the company since December 31, 2001. The
majority of these employee terminations were related to prior announcements
under the company's restructuring program. The prior year's results through
September 30 included $67 million pre-tax in restructuring charges.
Related Charges
The current year-to-date results include $37 million pre-tax of restructuring
related charges that were recorded primarily in the cost of goods sold section
within operating profit. Included in this total were $6 million for a building
write-down and $30 million in other cash costs, primarily relocation and
concurrent operating costs. The prior year's results through September 30
included $38 million pre-tax of restructuring related charges.
12
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Details of the 2002 restructuring liability through September 30 were as
follows:
Beginning Charge Cash Ending
(millions of dollars) Balance to Earnings Paid Non-cash Translation Acquisitions Balance
----------- ------------- ------ ---------- ------------- -------------- ---------
<c>
Restructuring
Termination costs $ 75 $ 14 $ (26) $ - $ - $ - $ 63
Non-employee exit costs 4 3 (7) - - - -
Translation impact (2) - - - (3) - (5)
Polar acquisition - - - - - 7 7
Related Charges
Asset write-down - 6 - (6) - - -
Various cash costs - 31 (31) - - - -
----- ----- ----- ----- ------ ----- -----
Total $ 77 $ 54 $ (64) $ (6) $ (3) $ 7 $ 65
===== ===== ===== ===== ====== ===== =====
NOTE G--ASSET IMPAIRMENT
The second quarter 2002 results were reduced by $22 million after-tax for an
impairment charge related to the company's minority investments in and advances
to a European business. The company acquired its initial investment in this
entity with its purchase of the appliance operations of Philips Electronics N.V.
in 1989. Continued deterioration in the German marketplace led to overcapacity
in the wood cabinet industry, which resulted in the business revising its
estimated future cash flows. These circumstances prompted the company to conduct
an impairment review, resulting in the above charge, which is reflected in
equity earnings (loss) in the consolidated condensed statement of earnings.
NOTE H--PRODUCT RECALLS
On October 16, 2001, in cooperation with the Consumer Products Safety Commission
(CPSC), the company announced a voluntary recall of 1.8 million microwave hood
combination units sold under the Whirlpool, KitchenAid, and Sears Kenmore
brands. During the third quarter of 2001, the company identified and
investigated a potential safety issue relating to the units and on September 24,
2001 notified the CPSC of the issue based on the company's initial
investigation. The company recognized a product recall pre-tax charge of $300
million ($184 million after-tax) during the third quarter of 2001 and recorded
this charge as a separate component of operating profit. During the fourth
quarter of 2001 this liability was reduced by $79 million ($48 million
after-tax) due to the development of a more efficient service repair procedure,
which enables faster repairs and reduced costs. There have been no significant
adjustments to any assumptions during 2002 and the company continues to fulfill
its commitment on any remaining product covered under the recall.
13
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
On January 31, 2002, in cooperation with the CPSC, the company announced a
voluntary recall of approximately 1.4 million dehumidifier units sold under the
Whirlpool, ComfortAire, and Sears Kenmore brands. During the fourth quarter of
2001, the company identified and investigated a potential safety issue relating
to the units and on November 29, 2001 notified the CPSC of this issue based on
the company's initial investigation. The company recognized an estimated product
recall pre-tax charge of $74 million ($45 million after-tax) during the fourth
quarter of 2001 and recorded this charge as a separate component of operating
profit. There have been no significant adjustments to any assumptions during
2002 and the company continues to fulfill its commitment on any remaining
product covered under the recall.
NOTE I--RELATED PARTY TRANSACTIONS
In February, 2002, the company repurchased 700,000 shares of its common stock
from the company's U.S. pension plan at a total cost of $46 million. The shares
were repurchased from the pension plan at an average cost of $66.32 per share,
which was based upon an average of the high and low market prices on the date of
purchase.
NOTE J--CONTINGENCIES
The company is involved in various legal actions arising in the normal course of
business. Management, after taking into consideration legal counsel's evaluation
of such actions, is of the opinion that the outcome of these matters will not
have a material adverse effect on the company's financial position.
The company is a party to certain financial guarantees and standby letters of
credit with risk not reflected on the balance sheet. The only significant
arrangement in place at September 30, 2002 and December 31, 2001 is in its
Brazilian subsidiary. As a standard business practice the subsidiary guarantees
customer lines of credit at commercial banks following its normal credit
policies. As of September 30, 2002 and December 31, 2001, these amounts totaled
$64 million and $124 million, respectively. The company currently believes the
risk of loss to be minimal.
NOTE K--GEOGRAPHIC SEGMENTS
The company identifies operating segments based upon geographical regions of
operations because each operating segment manufactures home appliances and
related components, but serves strategically different markets.
14
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The company's chief operating decision maker reviews each operating segment's
performance based upon operating profit excluding one-time charges such as
restructuring and related charges. These charges are included in operating
profit on a consolidated basis and included in the Other and (Eliminations)
column in the table below. For the quarter and year-to-date periods ended
September 30, 2002, the operating segments recorded total restructuring and
related charges as follows: North America $7 million and $24 million, Europe $7
million and $20 million, Latin America $1 million and $4 million, Asia $0
million and $3 million and Corporate $1 million and $3 million. Refer to Note F,
presented earlier, for a discussion of restructuring and related charges. For
the quarter and year-to-date periods ended September 30, 2001, the operating
segments recorded total restructuring and related charges as follows: North
America $6 million and $21 million, Europe $4 million and $21 million, Latin
America $4 million and $51 million, Asia $0 million and $9 million and Corporate
$0 million and $3 million. Also included in the Other and (Eliminations) column
in 2001 is the $300 million product recall charge recorded in the third quarter
of 2001.
(millions of dollars)
Three Months North Latin Other and
Ended September 30 America Europe America Asia (Eliminations) Consolidated
- ------------------------------------------------------------------------------------------------------
Net sales
2002 $ 1,814 $ 593 $ 300 $ 87 $ (35) $ 2,759
2001 $ 1,712 $ 508 $ 336 $ 83 $ (45) $ 2,594
Intersegment sales
2002 $ 13 $ 39 $ 34 $ 17 $ (103) $ -
2001 $ 21 $ 21 $ 43 $ 15 $ (100) $ -
Intangible amortization
2002 $ - $ - $ - $ - $ 1 $ 1
2001 $ 1 $ 3 $ 1 $ 1 $ 1 $ 7
Depreciation
2002 $ 54 $ 22 $ 18 $ 4 $ 3 $ 101
2001 $ 44 $ 17 $ 22 $ 4 $ 5 $ 92
Operating profit (loss)
2002 $ 204 $ 26 $ 25 $ 4 $ (60) $ 199
2001 $ 195 $ 15 $ 32 $ 4 $ (344) $ (98)
Total assets
September 30, 2002 $ 3,018 $ 1,953 $ 958 $ 495 $ 64 $ 6,488
December 31, 2001 $ 2,591 $ 2,067 $ 1,339 $ 653 $ 317 $ 6,967
Capital expenditures
2002 $ 34 $ 21 $ 20 $ 5 $ 8 $ 88
2001 $ 39 $ 12 $ 19 $ 2 $ 6 $ 78
15
WHIRLPOOL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(millions of dollars)
Nine Months North Latin Other and
Ended September 30 America Europe America Asia (Eliminations) Consolidated
- --------------------------------------------------------------------------------------------------------------
Net sales
2002 $ 5,369 $ 1,575 $ 950 $ 283 $ (107) $ 8,070
2001 $ 4,910 $ 1,504 $ 1,126 $ 277 $ (122) $ 7,695
Intersegment sales
2002 $ 48 $ 110 $ 104 $ 38 $ (300) $ -
2001 $ 62 $ 43 $ 119 $ 45 $ (269) $ -
Intangible amortization
2002 $ - $ - $ - $ - $ 2 $ 4
2001 $ 2 $ 10 $ 2 $ 4 $ 2 $ 20
Depreciation
2002 $ 149 $ 56 $ 63 $ 12 $ 7 $ 287
2001 $ 138 $ 50 $ 69 $ 11 $ 9 $ 277
Operating profit
2002 $ 618 $ 56 $ 63 $ 16 $ (182) $ 571
2001 $ 541 $ 24 $ 95 $ 14 $ (505) $ 169
Total assets
September 30, 2002 $ 3,018 $ 1,953 $ 958 $ 495 $ 64 $ 6,488
December 31, 2001 $ 2,591 $ 2,067 $ 1,339 $ 653 $ 317 $ 6,967
Capital expenditures
2002 $ 68 $ 45 $ 57 $ 10 $ 25 $ 205
2001 $ 95 $ 38 $ 50 $ 6 $ 7 $ 196
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
The statements of earnings summarize operating results for the three and nine
month periods ended September 30, 2002 and 2001. This section of Management's
Discussion highlights the main factors affecting the changes in operating
results.
Net Sales
The total number of units sold increased 8% for the quarter and 6% year-to-date
over the comparable 2001 periods. Excluding the acquisitions of Vitromatic and
Polar, as described in NOTE B to the Consolidated Condensed Financial
Statements, the total number of units sold increased 2% for the quarter and 4%
year-to-date over the comparable 2001 periods. Excluding the impact of currency
fluctuations around the world, net sales would have increased 6.4% and 5.8% over
the comparable periods. The table below provides a breakdown of net sales by
region.
3rd Quarter Year-to-date
--------------------------------- --------------------------------
(millions of dollars) 2002 2001 Change 2002 2001 Change
---------------- ------------- ------------- -------------- ------------- ----------
Net Sales:
North America $ 1,814 $ 1,712 6.0% $ 5,369 $ 4,910 9.3%
Europe 593 508 16.7 1,575 1,504 4.7
Latin America 300 336 (10.7) 950 1,126 (15.6)
Asia 87 83 4.8 283 277 2.2
Other/eliminations (35) (45) - (107) (122) -
-------- -------- -------- --------
Consolidated $ 2,759 $ 2,594 6.4% $ 8,070 $ 7,695 4.9%
======== ======== ====== ======== ======== =====
Regional trends were as follows:
- - North American unit volume increased 9% and 11% for the quarter and
year-to-date periods. The U.S. appliance industry volume increased 1%
for the quarter. The increased net sales reflected higher volume,
improved product mix and the inclusion of Vitromatic, which Whirlpool
acquired as a wholly owned subsidiary during the third quarter, as
further described below and in NOTE B to the Consolidated Condensed
Financial Statements. Vitromatic accounted for 5% of the 6% increase in
net sales shown above.
17
- - European unit volumes increased 8% for the quarterly comparison and were up
slightly on a year-to-date basis. European industry volume was fairly flat
for the quarter. Net sales were up 17% for the quarter due to a
strengthening currency and higher volume and up 5% for the year-to-date
comparison due to strengthening currency and an improved product mix. Net
sales were up 5% for the quarter excluding the impact of currency
fluctuations and sales from Polar.
- - Latin American unit volumes increased slightly for the quarter, but were
down 12% year-to-date due to continuing economic pressures and market
volatility within the region. Appliance industry shipments increased
approximately 1% for the quarter but were down 10% year-to-date. Sales for
the quarter decreased approximately 11%, as shown above, but actually
increased approximately 1%, excluding the effect of currency fluctuations,
primarily driven by higher volumes and improved pricing.
- - Asia's unit volumes increased 14% and 12% for the quarter and year-to-date
periods. The higher volumes combined to offset currency fluctuations and
challenging economic and industry environments in the region. Excluding the
impact of currency fluctuations, net sales increased by 4% for the quarter.
For the full year 2002, appliance industry shipments are expected to be up
approximately 5% in North America, down 1-2% in Europe, down 8% in Latin America
and flat in Asia.
Gross Margin
The gross margin percentage was level year-over-year for the quarterly
comparison and improved slightly year-to-date. Manufacturing productivity and
improved product mix in North America and Europe combined to offset lower
pension credits in North America and lower Befiex tax credits in Latin America,
which are discussed further under the "Other Matters" section of this report.
Selling and Administrative
Selling and administrative expenses as a percent of net sales were unfavorable
for the quarter and year-to-date periods. Benefits from the company's
restructuring program and higher sales were more than offset by higher corporate
overhead expenses and lower pension credits in the company's North American
region.
Other Income and Expense
Interest Income and Sundry Income (Expense) of $0 and $(31) million for the
quarter and year-to-date periods, respectively, were $15 million favorable and
$5 million unfavorable as compared to the same periods in 2001. The quarter's
results included higher foreign currency gains in Latin America and reduced
foreign currency losses in Europe. The year-to-date results reflect lower
interest income, primarily in Latin America and Asia, and higher levels of
losses on fixed asset disposals in North America. Reduced overall borrowings
and the lower interest rate environment
18
combined to reduce interest expense by $2 million and $20 million for the
quarter and year-to-date periods.
Income Taxes
The consolidated effective income tax rate was 35% for the quarter and
year-to-date versus rates of 42% and (20)% for the 2001 periods, respectively.
Effective rates in 2001 were affected by large product recall costs recorded
during the period.
Earnings
The tables below reconcile the company's net earnings and net earnings per
diluted share to core earnings and core earnings per diluted share for the three
and nine month periods ended September 30. Core earnings represent a measure of
operating results which are not recognized under Generally Accepted Accounting
Principles; however, the company believes that core earnings provide the reader
of the financial statements with a view of the underlying performance of ongoing
operations. The differences between reported net earnings and core earnings are
presented in the table on an after-tax basis and reference the related note to
the accompanying consolidated condensed financial statements:
Three Months Ended, September 30
----------------------------------------------------------
2002 2001
----------------------------- ---------------------------
(millions of dollars, except per share data) Earnings EPS Earnings EPS
------------- ------------- ------------ -------------
Net earnings (loss) - U.S. GAAP $ 101 $ 1.46 $ (94) $ (1.40)
Adjustments to net earnings (loss):
Restructuring and related charges (note F) 11 0.16 11 0.18
Product recall costs (note H) - - 184 2.68
------------- ------------- ------------ -------------
Total adjustments to net earnings (loss) 11 0.16 195 2.86
------------- ------------- ------------ -------------
Core earnings $ 112 $ 1.62 $ 101 $ 1.46
============= ============= ============ =============
Nine Months Ended, September 30
----------------------------------------------------------
2002 2001
----------------------------- ---------------------------
(millions of dollars, except per share data) Earnings EPS Earnings EPS
------------- ------------- ------------ -------------
Net earnings (loss) - U.S. GAAP $ (364) $ (5.37) $ - $ 0.00
Adjustments to net earnings (loss):
Restructuring and related charges (note F) 36 0.52 65 0.96
Write-off of equity interest and advances (note G) 22 0.32 - -
Product recall costs (note H) - - 184 2.71
Loss from discontinued operations (note D) - - 21 0.32
Adoption of new accounting standards (note C) 613 8.84 (8) (0.12)
Effect of basic versus diluted shares 0.12
------------- ------------- ------------ -------------
Total adjustments to net earnings (loss) 671 9.80 262 3.87
------------- ------------- ------------ -------------
Core earnings $ 307 $ 4.43 $ 262 $ 3.87
============= ============= ============ =============
19
The current period results were also affected by the elimination of goodwill
amortization, in accordance with SFAS No. 142. Adoption of the new standard
added approximately $6 million for the quarter and $17 million year-to-date,
after-tax, or $0.08 and $0.25 per diluted share for both net and core earnings.
The current year benefit attributable to the elimination of goodwill
amortization was mostly offset by lower pension credits which were negatively
impacted by a reduction in the discount rate, resulting from a declining
interest rate environment, and lower expected returns on pension plan assets.
CASH FLOWS
The statements of cash flows reflect the changes in cash and equivalents for the
nine months ended September 30, 2002 and 2001 by classifying transactions into
three major categories: operating, investing and financing activities.
Operating Activities
The company's main source of liquidity is cash from operating activities
consisting of net earnings (loss) adjusted for non-cash operating items such as
the cumulative effect of changes in accounting principle, equity earnings
(losses) of affiliates, gains (losses) on disposal of assets and depreciation
and amortization, as well as changes in operating assets and liabilities such as
receivables, inventories and payables.
Cash provided by operating activities in the first nine months of 2002 was $235
million compared to $647 million provided in 2001. The decline from the prior
year was due to reduced net working capital cash flows, product recall costs and
taxes paid on a gain associated with the sale of a portfolio of cross-currency
interest rate swaps during the fourth quarter of 2001 offset, somewhat, by an
increase in operating net earnings excluding the cumulative effect of a change
in accounting principle.
Investing Activities
The principal recurring investing activities are property additions. Net
property additions for the first nine months were $205 million in 2002 versus
$196 million in the 2001 period. These expenditures are primarily for equipment
and tooling related to product improvements, more efficient production methods,
and replacement for normal wear and tear.
The company also invested $27 million in acquiring 95% of the shares of Polar
S.A. during the second quarter of 2002 and $148 million in acquiring the
remaining 51% ownership in Vitromatic S.A. during the third quarter of 2002. See
NOTE B to the Consolidated Condensed Financial Statements.
20
Financing Activities
Dividends to shareholders totaled $69 million for the first nine months of 2002
versus $90 million in 2001. During the first quarter of 2001, both the fourth
quarter 2000 dividend and the first quarter 2001 dividend were paid.
Also affecting the company's financing cash flows were $46 million in treasury
stock purchases, discussed further under Financial Condition and Liquidity, and
$25 million related to the redemption of preferred stock of the company's
discontinued financing company, Whirlpool Financial Corporation. These cash
outflows were more than offset by $82 million in proceeds from the exercise of
company stock options during 2002.
The company's borrowings, adjusted for currency fluctuations, increased $137
million from year-end. The increase, primarily in short-term notes payable, was
due to seasonal working capital needs and the financing of our acquisitions as
disclosed above and in NOTE B to the Consolidated Condensed Financial
Statements.
FINANCIAL CONDITION AND LIQUIDITY
The financial position of the company remains strong at September 30, 2002. The
company's total assets are $6.5 billion and stockholders' equity is $0.9 billion
versus the September 30, 2001 totals of $6.9 billion and $1.4 billion,
respectively. The increase in assets due to the inclusion of Vitromatic was more
than offset by a debt paydown in the fourth quarter of 2001 and the write-down
of $613 million in goodwill assets as of January 1, 2002. These items account
for a majority of the change in both total assets and equity. The company's
total assets and stockholders' equity at December 31, 2001 were $7.0 billion and
$1.5 billion, respectively.
On February 15, 2000, the company announced that its Board of Directors approved
an extension of the company's stock repurchase program to $1 billion. The
additional $750 million share repurchase authorization extended the previously
authorized $250 million repurchase program which was announced March 1, 1999.
The shares are purchased in the open market and through privately negotiated
sales as the company deems appropriate. The company has purchased 12.7 million
shares at a cost of $684 million under this stock repurchase program, of which
0.7 million shares or $46 million were purchased in 2002. The 2002 shares were
repurchased from the company's U.S. pension plan at an average cost of $66.32
per share, which was based upon an average of the high and low market prices on
the date of purchase.
The company's debt continues to be rated investment grade by Moody's Investors
Service Inc., Standard and Poor's, and Fitch Ratings.
On July 3, 2001, the company issued 300 million euro denominated 5.875% notes
due 2006. The notes are general obligations of the company and the proceeds were
used for general corporate purposes.
21
The company maintains an $800 million five-year committed credit agreement
through June 2006 and a committed $400 million 364-day credit agreement through
May 2003 that provide backup liquidity. As of September 30, 2002, there were no
borrowings under these agreements, which represent the company's total committed
credit lines.
The company has external sources of capital available and believes it has
adequate financial resources and liquidity to meet anticipated business needs
and to fund future growth opportunities. Various borrowings of the company
subject it to certain restrictions and maintenance of certain financial ratios.
At September 30, 2002 the company was in compliance with all related covenants.
Failure to comply with any of the debt covenants could adversely affect the
company's liquidity and ability to meet capital resource needs.
OTHER MATTERS
During third quarter 2002, the company disclosed that airline industry problems
had the potential to reduce the value of aircraft lease assets pertaining to its
discontinued financing division. Approximately $68 million of Whirlpool's $96
million aircraft lease assets in discontinued operations could be reduced in
value if United Airlines were to fail to perform under the leases for financial
reasons including, but not limited to, filing for bankruptcy protection. At this
time, the company cannot determine the effect, if any, that any potential
non-performance might have on the value of the company's aircraft lease assets.
Presently, all lease payments are current however, the company is monitoring the
situation closely. An actual reduction in the value of the lease assets, should
it occur, would be a non-cash charge against discontinued operations and have no
impact on the company's appliance business. The company currently anticipates no
significant risk for its other aircraft assets, which are leased to a profitable
airline based outside the United States. The aircraft leases are part of
Whirlpool's $120 million leveraged lease portfolio in discontinued operations.
The portfolio had been part of Whirlpool Financial Corporation (WFC), the
company's financial services subsidiary that was discontinued in 1997.
During the third and fourth quarters of 2001, the company recorded $295 million
of charges related to two separate product recalls. As of December 31, 2001, the
remaining liability balance was $239 million, which has been reduced by cash
payments of $234 million during 2002. The company's estimated liability for
product recall expenses is affected by several factors such as customer contact
rate, consumer options, field repair costs, inventory repair costs, extended
warranty costs, communication structure and other miscellaneous costs such as
legal, logistics and consulting. There have been no significant adjustments to
any assumptions during 2002 and the company continues to fulfill its commitment
on any remaining product covered under the recall.
22
In December 1996, Multibras and Empresa Brasileira de Compressores S.A.
(Embraco), Brazilian subsidiaries, were granted additional export incentives in
connection with the Brazilian government's export incentive program (Befiex).
These incentives allowed the use of credits as an offset against current
Brazilian federal excise tax on domestic sales. The company recognized credits
of $9 million and $31 million in the 2002 quarter and year-to-date periods
compared with $10 million and $39 million in the year ago periods. The company
expects to recognize a total of $40 million of Befiex credits in 2002. The
company does not, however, expect to recognize additional Befiex credits beyond
the first quarter of 2003 until the method used to calculate the remaining
credit, which is currently under review, is approved by the Brazilian courts.
Accounting standards require the company to record a minimum liability if the
value of pension plan assets is less than accumulated pension benefit
obligations at December 31, which is the company's measurement date for plan
assets and obligations. Assuming year end plan asset values and interest rates
remain unchanged from September 30 levels, the company estimates that it would
need to either make voluntary cash contributions to U.S. pension plans of up to
approximately $200 million, before tax benefits, during the fourth quarter, or
record a non-cash charge to shareholder's equity of up to approximately $200
million at year end. In addition, the company would expect to recognize 2003
pension expense of approximately $40 to $60 million. These amounts, however, may
be materially different based on external market conditions, which have improved
since September 30 but remain highly volatile, and the effect those market
conditions will have on the value of pension plan assets and interest rates at
December 31, 2002.
In December, 2000 the company announced a global restructuring plan that when
fully implemented is currently expected to result in pre-tax charges of between
$300 and $350 million and an annualized savings of over $200 million. The plan
is expected to eliminate approximately 6,000 positions worldwide and the final
phases will be announced over the remainder of 2002. For the initiatives
announced through September 30, 2002, the company expects to eliminate
approximately 5,700 employees of which 4,600 had left the company through
September 30, 2002. The reduction in positions due to restructuring has been
partially offset by an increase in the number of employees in other areas of the
company. The company expects to realize approximately $160 million in annualized
benefits from the initiatives to date. The company expects to utilize cash on
hand and cash generated from operations to fund the remaining restructuring
initiatives.
23
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. Management's
Discussion and Analysis and other sections of this report may contain
forward-looking statements that reflect our current views with respect to future
events and financial performance.
Certain statements contained in this annual report and other written and oral
statements made from time to time by the company do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "estimate," "expect," "intend," "may," "could,"
"possible," "plan," "project," "will," "forecast," and similar words or
expressions. The company's forward-looking statements generally relate to its
growth strategies, financial results, product development, and sales efforts.
These forward-looking statements should be considered with the understanding
that such statements involve a variety of risks and uncertainties, known and
unknown, and may be affected by inaccurate assumptions. Consequently, no
forward-looking statement can be guaranteed and actual results may vary
materially.
Many factors could cause actual results to differ materially from the company's
forward-looking statements. Among these factors are: (1) competitive pressure to
reduce prices; (2) the ability to gain or maintain market share in an intensely
competitive global market; (3) the success of our global strategy to develop
brand differentiation and brand loyalty; (4) our ability to control operating
and selling costs and to maintain profit margins during industry downturns; (5)
gaining or losing a major trade partner; (6) currency exchange rate fluctuations
in Latin America, Europe, and Asia that could affect our consolidated balance
sheet and income statement; (7) our ability to recognize Befiex credits as
described in more detail in the "Other Matters" section within Management's
Discussion and Analysis; (8) the effectiveness of the series of restructuring
actions the company anticipates taking through 2002; (9) uncertainty regarding
the equity markets and the actual effect market changes will have on pension
plan assets and on the funding and liabilities associated with the Company's
U.S. pension plans; and (10) social, economic, and political volatility,
including potential terrorist activity, in the North American, Latin American,
European and Asian economies.
The company undertakes no obligation to update any forward-looking statement,
and investors are advised to review disclosures by the company in our filings
with the Securities and Exchange Commission. It is not possible to foresee or
identify all factors that could cause actual results to differ from expected or
historic results. Therefore, investors should not consider the foregoing factors
to be an exhaustive statement of all risks, uncertainties, or factors that could
potentially cause actual results to differ.
24
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our exposures to market risk since
December 31, 2001.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and our chief financial officer, after evaluating the effectiveness
of the Company's "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a
date (the "Evaluation Date") within 90 days before the filing date of this
quarterly report, have concluded that as of the Evaluation Date, our
disclosure controls and procedures were adequate and designed to ensure
that material information relating to us and our consolidated subsidiaries
would be made known to them by others within those entities.
(b) Changes in internal controls. There were no significant changes in our
internal controls or to our knowledge, in other factors that could
significantly affect our disclosure controls and procedures subsequent to
the Evaluation Date.
25
PART II. OTHER INFORMATION
WHIRLPOOL CORPORATION AND SUBSIDIARIES
Quarter Ended September 30, 2002
Item 6. Exhibits and Reports on Form 8-K
b. The registrant filed the following Current Reports on Form 8-K for the
quarterly period ended September 30, 2002.
A Current Report on Form 8-K dated August 6, 2002 pursuant to Item 9,
"Regulation FD Disclosure," submitting to the SEC sworn statements by each of
the Principal Executive Officer, David R. Whitwam, and Principal Financial
Officer, Mark E. Brown, of Whirlpool Corporation pursuant to Securities and
Exchange Commission Order No. 4-460.
A Current Report on Form 8-K dated August 15, 2002 pursuant to Item 5, "Other
Events" announcing the appointment of R. Stephen Barrett, Jr. as executive vice
president and chief financial officer of Whirlpool Corporation.
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WHIRLPOOL CORPORATION
(Registrant)
By /s/ R. Stephen Barrett
------------------------------
R. Stephen Barrett
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
November 6, 2002
27
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Whirlpool Corporation
(the "Company") for the quarterly period ended on September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
David R. Whitwam, as Chief Executive of the Company, and R. Stephen Barrett, as
Chief Financial Officer of the Company, each hereby certifies, pursuant to 18
U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002) that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly represents, in all material
respects, the financial condition and results of operations of the Company.
/s/ David R. Whitwam
-----------------------------
Name: David R. Whitwam
Title: Chairman of the Board
Chief Executive Officer
Date: November 6, 2002
/s/ R. Stephen Barrett
-----------------------------------
Name: R. Stephen Barrett
Title: Executive Vice President
and Chief Financial Officer
Date: November 6, 2002
CERTIFICATIONS*
- ---------------
I, David R. Whitwam, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Whirlpool
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 6, 2002 /s/ David R. Whitwam
--------------------- ------------------------------
Name: David R. Whitwam
Title: Chairman of the Board
Chief Executive Officer
CERTIFICATIONS*
- ---------------
I, R. Stephen Barrett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Whirlpool
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 6, 2002 /s/ R. Stephen Barrett
------------------ ---------------------------------------
Name: R. Stephen Barrett
Title: Executive Vice President
and Chief Financial Officer