PURSUANT TO RULE 424(b)(5) REGISTRATION NO. 33-40249 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION DATED JULY 19, 1996 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 19, 1996 $200,000,000 LOGO % DEBENTURES DUE , 2016 ----------- Interest on the Debentures is payable on and of each year, commencing , 1997. The Debentures are not redeemable or repayable prior to maturity and do not provide for any sinking fund. The Debentures will be represented by a global security registered in the name of a nominee of The Depository Trust Company. Beneficial interests in the Debentures will be shown on, and transfers thereof will be effected only through, records maintained by DTC (with respect to participants' interests) and its participants. The Debentures will be issued only in denominations of $1,000 and integral multiples thereof. Except as described herein, Debentures in definitive form will not be issued. See "Description of Debentures--Book-Entry Procedures." ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIESCOMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3) ----------------- ------------ ------------- Per Debenture...................... % % % Total.............................. $ $ $ - ----- (1) Plus accrued interest, if any, from , 1996. (2) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (3) Before deducting estimated expenses of $ payable by the Company. ----------- The Debentures offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that the Debentures will be ready for delivery in book-entry form only through the facilities of DTC in New York, New York, on or about July , 1996, against payment therefor in immediately available funds. GOLDMAN, SACHS & CO. SALOMON BROTHERS INC ----------- The date of this Prospectus Supplement is July , 1996. IN CONNECTION WITH ANY DISTRIBUTION OF THE DEBENTURES, THE UNDERWRITERS MAY EFFECT TRANSACTIONS IN THE DEBENTURES WITH A VIEW TO STABILIZING OR MAINTAINING THE MARKET PRICES OF THE DEBENTURES AT LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN ANY OVER-THE-COUNTER MARKET OR OTHERWISE AND, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ---------------- THE COMPANY Whirlpool Corporation, the leading worldwide manufacturer and marketer of major home appliances, was incorporated in 1955 under the laws of Delaware as the successor to a business that traces its origin to 1898. The Company manufactures and markets a full line of major home appliances and related products for home and commercial use and provides certain inventory, consumer, and other financial services. The Company manufactures its products in twelve countries and markets its products under eleven major brand names in approximately 140 countries. Major home appliances are marketed and distributed in the United States under the WHIRLPOOL, KITCHENAID, ROPER, ESTATE, CHAMBERS, and COOLERATOR brand names through Company-owned sales branches primarily to retailers and builders. The Company has been the principal supplier of home laundry appliances to Sears, Roebuck and Co. ("Sears") for almost 80 years. Major home appliances are manufactured and/or distributed in Canada under the INGLIS, ADMIRAL, SPEED QUEEN, WHIRLPOOL, ESTATE, ROPER, and KITCHENAID brand names. Whirlpool Europe markets and distributes its major home appliances through regional networks under a number of brand names. In 1990, Whirlpool Europe began an estimated $110 million program to introduce the WHIRLPOOL brand name to the European marketplace. Whirlpool Europe also markets products under the BAUKNECHT, IGNIS, and LADEN brand names. In Latin America, the Company offers a broad range of products under well-recognized brand names such as WHIRLPOOL, BRASTEMP, CONSUL, and SEMER. In Asia, the Company markets and distributes its major home appliances through four operating regions: the Greater China region, which includes the Peoples Republic of China and Hong Kong; the South Asia region, which includes India, Pakistan, and other surrounding markets; the North Asia region, which includes Japan, Korea, the Philippines, and Taiwan; and the Southeast Asia--Australia region, which includes Southeast Asia, Australia, and New Zealand. The Company markets and sells its products in Asia under the WHIRLPOOL, KITCHENAID, ROPER, IGNIS, BAUKNECHT, SMC, NARCISSUS, SNOWFLAKE, RAYBO, TVS, and KELVINATOR brand names. Whirlpool Financial Corporation ("WFC") provides diversified financial services to businesses and consumers throughout the United States and Canada and factoring, inventory, and display financing activities in Europe, Mexico, and Argentina. WFC conducts its business through three divisions: the Inventory Finance Division, which provides floorplan financing and display programs to retailers; the Consumer Finance Division, which provides installment financing and, through Whirlpool Financial National Bank ("WFNB"), WFC's credit card bank, consumer credit card programs; and the International Division, operated through Whirlpool Financial Corporation International, Whirlpool Financial Latin America Inc., and Whirlpool Financial Corporation Overseas, wholly owned subsidiaries of WFC, which provide factoring, inventory, and display financing for retailers of products of Whirlpool Europe, Whirlpool Argentina, and Vitromatic, Whirlpool's joint venture company in Mexico. Inventory financing represents the largest segment of WFC's business, providing services for manufacturers, distributors, and retailers in the appliance, consumer electronics, outdoor power equipment, residential heating and cooling equipment, and music industries. WFC has been phasing out its aerospace financing and leasing portfolios since 1993. S-2 RECENT DEVELOPMENTS The Company's net earnings for the three months ended June 30, 1996 were $52 million, or $.70 per share, equal to those for second quarter 1995. Revenues for the quarter ended June 30, 1996 reached $2.27 billion, 7% higher than the prior year period. Net earnings for the six months ended June 30, 1996 were $90 million, or $1.20 per share, versus $127 million, or $1.70 per share, through June 30, 1995. Revenues for the six month period totaled $4.33 billion, up 6% from the prior year period. Whirlpool's North American business had its best quarter ever during the three months ended June 30, 1996. Company product shipments in the region grew at a rate of 11% in the second quarter, exceeding industry expansion of 9%. Net sales also rose significantly and quarterly operating profits increased by nearly 70%. North American industry-wide shipments are currently expected to be up approximately 3% to 4% for the full year over 1995. The economic and industry environment in Europe remained difficult throughout the second quarter of 1996, as total industry volumes and product mix were less favorable than during the 1995 period. Nevertheless, the Company's European operations achieved increases in both product shipments and net sales in the second quarter. Additionally, continued strengthening of the Italian lira against other European currencies adversely impacted second quarter regional operating results and is expected to adversely impact full year regional operating results. European margins were down for both periods due to customers shifting to lower margin brands and products, currency fluctuations, delays in introducing new products, and stagnant pricing in the marketplace. For the remainder of 1996, European industry-wide shipments are currently expected to be approximately equal to last year's shipments. Record total quarterly earnings from the Company's operations in Latin America increased by more than 25% from the same period in 1995 as the Company's affiliates in Brazil continued to significantly exceed performance expectations. A sharp year-to-date increase in affiliate and industry appliance shipments in that country is attributable at least in part to improved availability of consumer credit and efforts to lower interest rates. The Company posted a slight operating loss in Latin America outside of Brazil. Economies in the balance of the region remain depressed and year-over-year product shipments were off significantly in the second quarter. Some market recovery is occurring in Argentina, but at a slow pace. The Company posted substantial gains in appliance shipments and revenues in Asia during the quarter. The anticipated quarterly and first half operating losses in the region were comparable to those sustained in the prior periods as the Company's strategy to establish a manufacturing and marketing presence in Asia through a number of joint ventures shifted into the execution phase from the start-up phase. See "Management's Discussion and Analysis of Results of Operations and Financial Condition." S-3 The following table presents selected unaudited financial data for the six months ended June 30, 1996 and 1995. See "Selected Historical Consolidated Financial Data." WHIRLPOOL CORPORATION WHIRLPOOL WITH WFC ON CORPORATION AN EQUITY (CONSOLIDATED) BASIS WFC ---------------- -------------- ---------- SIX SIX MONTHS MONTHS SIX MONTHS ENDED JUNE ENDED ENDED JUNE 30, 30, JUNE 30, ---------------- -------------- ---------- 1996 1995 1996 1995 1996 1995 ------- ------- ------ ------ ---- ---- (IN MILLIONS, EXCEPT PER SHARE DATA) Revenues Net sales...................... $ 4,242 $ 4,008 $4,242 $4,008 $-- $-- Financial services............. 89 92 -- -- 109 108 ------- ------- ------ ------ ---- ---- Total........................ 4,331 4,100 4,242 4,008 109 108 Expenses Cost of products sold.......... 3,300 3,028 3,300 3,028 -- -- Selling and administrative..... 811 800 771 756 60 60 Financial services interest.... 32 33 -- -- 38 38 Intangible amortization........ 18 14 18 14 -- -- ------- ------- ------ ------ ---- ---- 4,161 3,875 4,089 3,798 98 98 ------- ------- ------ ------ ---- ---- Operating Profit............. 170 225 153 210 11 10 Other Income (Expense) Interest and sundry............ (1) -- (7) (6) 6 6 Interest expense............... (84) (63) (78) (58) -- -- ------- ------- ------ ------ ---- ---- Earnings Before Taxes and Other Items................. 85 162 68 146 17 16 Income taxes..................... 39 66 33 60 6 6 ------- ------- ------ ------ ---- ---- Earnings Before Equity Earnings and Minority Interests................... 46 96 35 86 11 10 Equity in WFC.................... -- -- 9 8 -- -- Equity in affiliated companies... 41 34 41 34 -- -- Minority interests............... 3 (3) 5 (1) (2) (2) ------- ------- ------ ------ ---- ---- Net Earnings................. $ 90 $ 127 $ 90 $ 127 $ 9 $ 8 ======= ======= ====== ====== ==== ==== Net primary earnings per share of common stock.................... $ 1.20 $ 1.70 ======= ======= Cash dividends................... $ 0.68 $ 0.68 ======= ======= S-4 USE OF PROCEEDS The Company will use the net proceeds from the Debentures to repay certain indebtedness incurred for working capital purposes. Such indebtedness is of varying maturities of up to ninety days and bears interest at rates from 5.25% to 5.50% per annum. Prior to such use, the net proceeds may be placed in short-term investments, including commercial paper and certificates of deposit. CAPITALIZATION The following table sets forth the total capitalization of the Company at March 31, 1996, and as adjusted to give effect to the sale by the Company of the Debentures offered hereby and the application of the net proceeds therefrom (as if such sale and application of proceeds occurred on such date). See "Use of Proceeds." AT MARCH 31, 1996 ------------------- ACTUAL AS ADJUSTED ------ ----------- (IN MILLIONS) Notes Payable and Current Maturities of Long-Term Debt: Whirlpool Corporation.................................... $ 687 $ 487 Consolidated subsidiaries................................ 1,535 1,535 ------ ------ Total Notes Payable and Current Maturities of Long-Term Debt.................................................. $2,222 $2,022 ====== ====== Long-term Debt: Whirlpool Corporation.................................... $ 753 $ 953 Consolidated subsidiaries................................ 204 204 ------ ------ Total Long-term Debt................................... 957 1,157 ------ ------ Stockholders' Equity: Common stock............................................. 81 81 Paid-in capital.......................................... 232 232 Retained earnings........................................ 1,875 1,875 Unearned restricted stock................................ (8) (8) Cumulative translation adjustments....................... (52) (52) Treasury stock........................................... (235) (235) ------ ------ Total Stockholders' Equity............................. $1,893 $1,893 ------ ------ Total Long-term Debt and Stockholders' Equity........ $2,850 $3,050 ====== ====== S-5 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The table below sets forth selected historical consolidated financial data for the Company for the three months ended March 31, 1996 and 1995 and for the years ended December 31, 1995, 1994, and 1993. Such data is principally derived from, and should be read in conjunction with, the related audited consolidated financial statements and accompanying notes included in the Company's Annual Reports on Form 10-K and the unaudited condensed consolidated financial statements and accompanying notes included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 incorporated by reference herein. The information for the three month periods is unaudited, but, in the opinion of the Company, reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company's results of operations and financial condition for such periods. Results for interim periods are not necessarily indicative of results for any other periods or for the year. WHIRLPOOL CORPORATION WITH WFC ON AN EQUITY WHIRLPOOL CORPORATION (CONSOLIDATED) BASIS WFC ------------------------------------------------ ------------------------- ------------------------- THREE MONTHS THREE MONTHS YEAR ENDED THREE MONTHS THREE MONTHS ENDED ENDED DECEMBER 31, ENDED YEAR ENDED ENDED YEAR ENDED MARCH 31, MARCH 31, ---------------------- MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, 1996 1995 1995 1994 1993 1996 1995 1996 1995 ------------ ------------ ------ ------ ------ ------------ ------------ ------------ ------------ (IN MILLIONS, EXCEPT PER SHARE DATA) Revenues Net sales.......... $2,013 $1,939 $8,163 $7,949 $7,368 $2,013 $8,163 $-- $-- Financial services........... 46 46 184 155 165 -- -- 54 219 ------ ------ ------ ------ ------ ------ ------ ---- ---- Total............ 2,059 1,985 8,347 8,104 7,533 2,013 8,163 54 219 Expenses Cost of products sold............... 1,563 1,438 6,245 5,952 5,503 1,563 6,245 -- -- Selling and administrative..... 393 396 1,609 1,490 1,433 369 1,521 32 123 Financial services interest........... 16 16 66 51 59 -- -- 19 79 Intangible amortization....... 9 6 31 24 25 9 31 -- -- Gain on dispositions....... -- -- -- (60) -- -- -- -- -- Restructuring costs.............. -- -- -- 250 31 -- -- -- -- ------ ------ ------ ------ ------ ------ ------ ---- ---- 1,981 1,856 7,951 7,707 7,051 1,941 7,797 51 202 ------ ------ ------ ------ ------ ------ ------ ---- ---- Operating Profit. 78 129 396 397 482 72 366 3 17 Other Income (Expense) Interest and sundry............. 3 (2) (13) 9 6 (2) (23) 5 11 Interest expense... (40) (29) (141) (114) (113) (37) (129) -- -- ------ ------ ------ ------ ------ ------ ------ ---- ---- Earnings Before Taxes, Other Items and Accounting Change........... 41 98 242 292 375 33 214 8 28 Income taxes........ 18 39 100 176 148 15 90 3 10 ------ ------ ------ ------ ------ ------ ------ ---- ---- Earnings Before Equity Earnings, Minority Interest and Accounting Change........... 23 59 142 116 227 18 124 5 18 Equity in WFC....... -- -- -- -- -- 4 14 -- -- Equity in affiliated companies........... 14 18 72 59 16 14 72 -- -- Minority interests.. 1 (2) (5) (17) (12) 2 (1) (1) (4) ------ ------ ------ ------ ------ ------ ------ ---- ---- Net Earnings Before Cumulative Effect of Accounting Change........... 38 75 209 158 231 38 209 4 14 Cumulative effect of accounting change for post-retirement benefits............ -- -- -- -- (180) -- -- -- -- ------ ------ ------ ------ ------ ------ ------ ---- ---- Net Earnings..... $ 38 $ 75 $ 209 $ 158 $ 51 $ 38 $ 209 $ 4 $ 14 ====== ====== ====== ====== ====== ====== ====== ==== ==== Per share of common stock: Primary earnings before accounting change............. $ 0.50 $ 1.00 $ 2.80 $ 2.10 $ 3.19 Primary earnings... $ 0.50 $ 1.00 $ 2.80 $ 2.10 $ 0.67 Fully diluted earnings before accounting change.. $ 0.50 $ 0.98 $ 2.76 $ 2.09 $ 3.11 Fully diluted earnings........... $ 0.50 $ 0.98 $ 2.76 $ 2.09 $ 0.67 Cash dividends..... $ 0.34 $ 0.34 $ 1.36 $ 1.22 $ 1.19 Average number of common shares outstanding......... 75.0 74.7 74.8 75.5 72.3 S-6 The following appliance business data is presented as supplemental information: NET SALES BY BUSINESS UNIT: INCREASE/(DECREASE) INCREASE/(DECREASE) 1995 OVER 1994 1994 OVER 1993 1993 ------ -------------------- ------ --------------------- ------ (IN MILLIONS) North America........... $5,093 $ 45 1% $5,048 $489 11% $4,559 Europe.................. 2,428 55 2 2,373 148 7 2,225 Asia.................... 376 171 83 205 54 36 151 Latin America........... 271 (58) (18) 329 26 9 303 Other................... (5) 1 -- (6) (136) -- 130 ------ --------- --------- ------ ---------- -------- ------ Total Appliance Business........... $8,163 $ 214 3% $7,949 $ 581 8% $7,368 ====== ========= ========= ====== ========== ======== ====== OPERATING PROFIT BY BUSINESS UNIT: INCREASE/(DECREASE) INCREASE/(DECREASE) 1995 OVER 1994 1994 OVER 1993 1993 ------ -------------------- ------ --------------------- ------ (IN MILLIONS) North America........... $ 445 $ (77) (15)% $ 522 $ 48 10% $ 474 Europe.................. 92 (71) (44) 163 24 17 139 Asia.................... (50) (28) (127) (22) (17) -- (5) Latin America........... 26 (23) (47) 49 6 16 43 Restructuring........... -- 248 -- (248) (225) -- (23) Business Disposition.... -- (60) -- 60 68 -- (8) Other................... (147) 7 5 (154) (38) (33) (116) ------ --------- --------- ------ ---------- -------- ------ Total Appliance Business........... $ 366 $ (4) (1)% $ 370 $ (134) (27)% $ 504 ====== ========= ========= ====== ========== ======== ====== MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 Revenues Revenues for the first quarter of 1996 increased 4% over the first quarter of 1995 driven by increases in volumes and pricing, partially offset by unfavorable brand and product mix. Currency fluctuations did not materially affect the revenue comparison to 1995. North American sales increased 6% due primarily to increased volumes and pricing in an industry market that grew only slightly during the period. European sales decreased 4% for the quarter and were down 5% excluding the effects of currency fluctuations. The decrease occurred in spite of increased volumes which were more than offset by unfavorable brand and product mix. European unit volumes were up 2% while the industry dropped by 3% to 4%. Price increases of 3% were announced in North America at the beginning of the year and price increases have been announced or implemented in several European markets. Financial services revenues were up 5% as WFC continued to expand its core inventory and consumer finance businesses. Expenses The gross margin percentage deteriorated by 3.5 percentage points in the first quarter of 1996 compared to the first quarter of 1995 reflecting the cumulative effect of significant material cost S-7 increases, competitive pressures and lower than expected industry growth particularly in Europe and North America, which adversely affected industry and Whirlpool profitability since the second quarter of 1995. North American gross margins were down slightly in 1996 due to the higher material costs mentioned earlier partially offset by price increases and operating efficiencies. European gross margins fell sharply in 1996 because of higher material costs, competitive pressures and a consumer shift to lower-priced products. The combined effect of those issues in the first quarter of 1996 eased somewhat from the fourth quarter of 1995, but made for an unfavorable comparison to the first quarter of 1995. Appliance selling and administrative expenses as a percent of net sales decreased from 19.1% in the first quarter of 1995 to 18.3% in the first quarter of 1996. Both North American and European expenses as a percent of net sales were down compared to the prior period due primarily to tight control on advertising and other spending. Europe also benefited from cost reductions stemming from its restructuring efforts executed during 1995. Finally, a portion of the appliance decrease reflects the impact of a 67% increase in Asian sales relative to its fixed infrastructure costs put in place during 1994 and 1995. Financial services expenses as a percent of the related revenue were up primarily due to higher losses on certain consumer financing investments. WFC has taken steps to mitigate further losses. Other Income and (Expense) The improvement in appliance business interest and sundry compared to the prior year period is due primarily to lower foreign currency losses. The increase in interest expense compared to the prior period is due primarily to higher borrowing levels to fund acquisitions and higher working capital levels, partially offset by lower interest rates. Income Taxes The consolidated provision for income taxes as a percent of earnings before income taxes and other items was at 44% in the first quarter of 1996 compared to 39% in the first quarter of 1995. The higher effective tax rate is primarily due to the impact of nondeductible goodwill on a lower level of pretax earnings and lower tax benefits recognized on Asian losses. Equity in Affiliated Companies Equity earnings in affiliated companies were $14 million in the first quarter of 1996 compared to $18 million in the first quarter of 1995. The Company's Brazilian affiliates generated equity earnings of $17 million in the first quarters of both 1996 and 1995. Affiliate companies in Brazil continued to benefit from a robust national appliance market and long-term cost-reduction efforts. Results for the first quarter of 1995 were favorably affected by certain tax credit benefits. The Company's Mexican affiliate generated an equity loss of $4 million for the first quarter of 1996 compared to break-even results in the first quarter of 1994. This performance resulted from lower shipment volumes reflecting industry declines in Mexico as well as high financing costs and foreign exchange losses as compared with gains in the first quarter of 1995. Economic volatility and government economic policy changes (including those affecting exchange rates and tariffs) continue to affect consumer purchasing power and the appliance industry as a whole in Mexico, Brazil and the entire Latin American region. The outlook in these regions remains uncertain. S-8 YEARS ENDED DECEMBER 31, 1995 AND 1994 Revenues Revenues were $8.3 billion in 1995, an increase of 3% over 1994. Excluding the effects of currency fluctuations, revenues were flat from year to year with the impact of increased volume offset by unfavorable brand and product mix. North America sales were up 1% due primarily to selective price increases partially offset by unfavorable brand and product mix. North American unit volumes were virtually identical to those from 1994, although the regional home-appliance industry slipped by more than 1%. European revenues were up 2% compared to 1994. Excluding the effects of currency fluctuations, revenues were off 8% due primarily to a 2% decline in unit volumes and unfavorable brand and product mix. Volumes were hurt by weak demand across the region, particularly toward the end of the year and more pronounced in Germany and France, which together account for about 40% of European sales. In addition, Europe saw a slight erosion of its market share following a major sales-force reorganization. Despite continuing sluggishness in Europe, ongoing large-scale introduction of redesigned products are expected to generate increased volumes beginning in the second quarter of 1996. Financial services revenues were up 19% in 1995 as WFC continued to expand its core inventory and consumer finance businesses. Revenues were $8.1 billion in 1994, an increase of 8% over 1993 due primarily to unit volume increases and North American price increases. The overall impact of currency fluctuations was not significant. North American revenues increased 11% due primarily to increased volumes and pricing partially offset by product mix. North American unit volumes increased 9% for the year which was slightly below the overall increase for the industry. Shipments of appliances bearing the KITCHENAID, WHIRLPOOL, and ROPER brand names were up strongly for the year. Shipments to Sears under its KENMORE brand were down slightly as Sears closed its catalog business and a number of retail stores in 1993. European revenues were up 7% due primarily to increased volumes which grew at more than twice the rate of the industry average of 3%. Financial services revenues were down 5% due primarily to the continued liquidation of WFC's commercial lending portfolio. Expenses The relationship of cost of products sold to net sales deteriorated almost 2% in 1995 compared to 1994. North American margins declined about 2% in 1995 due to higher material and component costs, start-up costs associated with the production of redesigned midsize refrigerators and the difficult economic climate in Mexico, partially offset by price increases. European margins were down 1% in 1995 due to lower volumes and reduced production levels, combined with sharply higher material and component costs and an industry shift to lower-priced products partially offset by productivity improvements, continued expense control, benefits of restructuring, and currency translation. The relationship of cost of products sold to net sales deteriorated slightly in 1994 compared to 1993. North American margins were up slightly in 1994 due to improved productively, increased volumes, and pricing offset somewhat by chlorofluorocarbon (CFC) taxes, compliance costs associated with energy regulatory requirements, and product mix. European margins were down in 1994 due to the competitive pressures of a consolidating industry and to brand and product mix as consumer demand shifted somewhat to lower margin, value-brand appliances. The ratio of consolidated selling and administrative expenses as a percent of net sales was higher by nearly 1% in 1995 compared to 1994 reflecting a similar deterioration for the appliance business expense ratio. North American expenses as a percent of net sales were down slightly in 1995 due to cost reduction initiatives and lower compensation costs. After excluding the impact of currency translation, European expenses were down compared to last year reflecting expense control efforts and benefits of restructuring. However, European expenses as a percent of net sales were up almost 2% in 1995 primarily due to decreased sales after excluding currency translation effects. Both 1995 S-9 and 1994 were affected by increased strategic spending to expand the Company's presence in Asia. WFC selling and administrative expenses as a percent of financial services revenue were down nearly 1% as WFC successfully transitioned to its strategy of supporting the inventory and consumer finance business. The ratio of consolidated selling and administrative expenses as a percent of revenues, excluding the effect of the 1993 WFC first quarter charge (see "Net Earnings"), was flat in 1994 compared to 1993. The appliance business expense ratio was up slightly. North American expenses as a percent of net sales were up slightly due primarily to costs associated with the new distribution arrangement (see Note 10 to the Company's consolidated financial statements) and due to costs related to a refrigerator conversion project. European expenses as a percent of net sales were down due to ongoing cost reduction initiatives and benefits from restructuring. The year was also affected by a planned increase in costs related to the Company's strategy to expand its presence in Asia. Financial services expenses excluding nonrecurring charges, as a percent of the related revenue, were up slightly due to accelerated depreciation of aircraft on lease and increased operating expenses to support the inventory and consumer finance businesses. WFC's financial services interest expense as a percent of the related revenue was up in 1995 compared to 1994 due to higher interest rates in 1995 but was down in 1994 compared to 1993 largely due to lower interest rates resulting from the transition of medium term debt to commercial paper. In the third quarter of 1994, the Company sold its minority interest in Matsushita Floor Care Company ("MFCC"), a vacuum cleaner manufacturer, resulting in a $26 million pre-tax gain. The Company also sold its European compressor operation in the second quarter of 1994 resulting in a $34 million pre-tax gain. See "Cash Flows--Investing Activities." Restructuring costs of $250 million for 1994 consists of charges to consolidate and reorganize the Company's European sales, marketing and support functions to better serve dealers by trade channel rather than by country, rationalization of European customer services and manufacturing operations, the closure of two North American manufacturing facilities and the further consolidation and rationalization of North American operations. The restructuring is expected to result in annual cost savings of $150 million by 1997. See Note 10 to the Company's consolidated financial statements. Restructuring costs for 1993 consist of charges to end independent distributor agreements in North America in order to streamline the distribution process, facility consolidation and employee related charges in Canada, the pre-tax loss on the sale of a refrigerator plant in Barcelona, Spain and employee related costs associated with efforts to increase cost effectiveness in Europe. Interest and Sundry The change in interest and sundry for 1995 compared to the prior year is due primarily to foreign currency losses. However, the overall impact of currency fluctuations in 1995 was not significant due to offsetting foreign currency gains. Interest Expense Appliance business interest expense increased significantly in 1995 due to higher borrowing levels (see "Cash Flows--Financing Activities") and higher interests rates. Appliance business interest expense was flat in 1994 due to lower borrowing levels offset by higher interest rates. Income Taxes The consolidated provision for income taxes as a percent of earnings before taxes and other items was 41% in 1995 compared to 60% in 1994 (40% excluding the effect of restructuring and business S-10 dispositions) and 40% in 1993. The increase in the provision in 1995 compared to 1994, excluding the effect of restructuring and business dispositions, is primarily due to the relatively larger impact permanent items have on the effective tax rate due to lower net earnings nearly offset by favorable settlements of prior year tax returns. The higher effective rate in 1994 is due primarily to the impact of the 1994 restructuring charge and a 1994 tax charge associated with the sale of the European compressor operation partially offset by a 1994 tax benefit associated with the sale of MFCC. Excluding the effects of restructuring and business dispositions, the 1994 effective tax rate is essentially flat with 1993. Earnings before Equity Earnings and Other Items Earnings before equity earnings and other items were $142 million in 1995, $116 million in 1994 and $227 million in 1993. Excluding the impact of restructuring, business dispositions, and the 1993 WFC charge, earnings before equity earnings and other items were $142 million in 1995, $290 million in 1994 and $281 million in 1993. Equity in Affiliated Companies Equity earnings were $72 million in 1995 compared to $59 million in 1994 and $16 million in 1993. The Company's Brazilian affiliates generated equity earnings of $70 million in 1995 compared to $39 million in 1994 and $21 million in 1993 reflecting primarily the increased consumer demand stimulated by the Brazilian government's economic plan implemented in mid-1994. Results were also favorably affected by certain non-recurring tax benefits, including $17 million of excise tax credits and the consequences of the May 1994 merger of two of the Brazilian affiliates, Brastemp S.A. and Consul S.A., into a new entity, Multibras S.A. The merger resulted in operating efficiencies as an outcome of consolidating selling and administrative functions, improved utilization of prior year tax losses and more flexibility in management of brands and products. The Company's Mexican affiliate equity earnings were break-even in 1995 as compared to equity earnings of $16 million in 1994 and an equity loss of $6 million in 1993. Reduced shipments and higher financing costs resulting from difficult economic conditions in Mexico were partially offset by cost reductions and net translation gains from the peso devaluation of $25 million. The increase in 1994 performance is due to increased shipments, improved cost control, and a $12 million gain resulting from the devaluation of the Mexican peso. Results in 1993 include a $3 million charge for taxes related to prior years. Economic volatility and exchange rate changes continue to affect consumer purchasing power and the appliance industry as a whole in Brazil and Mexico. Net Earnings In 1994, the Company recorded an after-tax restructuring charge of $192 million or $2.54 per share. Business dispositions in 1994 resulted in an after-tax gain of $18 million or $.24 per share. The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in the first quarter of 1993 resulting in a one time after-tax charge to earnings of $180 million or $2.52 per share. The Company also recorded a first quarter after-tax charge of $40 million or $.56 per share primarily to adjust the value of specific aerospace and commercial accounts in WFC's financing portfolio. Absent all restructuring, business dispositions, SFAS No. 106 and WFC charges mentioned above, net earnings were $209 million in 1995, $332 million in 1994, and $285 million in 1993. Corresponding earnings per share were $2.80 in 1995, $4.40 in 1994, and $3.94 in 1993. S-11 CASH FLOWS Operating Activities The Company's main source of liquidity is cash from operating activities consisting of net earnings from operations adjusted for non-cash operating items such as depreciation and changes in operating assets and liabilities such as receivables, inventories, and payables. Cash used for operating activities was $119 million in the first quarter of 1996 and $134 million in the first quarter of 1995, largely reflecting seasonal working capital needs of the appliance business to build inventories. Cash provided by operating activities was $377 million in 1995, $449 million in 1994, and $629 million in 1993. The decrease in 1995 from the prior year is due primarily to lower earnings excluding the 1994 effects of restructuring and business dispositions and 1995 restructuring spending partially offset by favorable accounts receivable performance. The decrease in 1994 is due primarily to changes in receivables, inventories, other operating accounts, and restructuring spending. Other operating accounts primarily include accrued expenses related to employee compensation, income taxes, product warranty, and advertising. Investing Activities The principal recurring investing activities are property additions and investments in and collection of financing receivables and leases. Net property additions in the first quarter of 1996 were $61 million compared to $70 million in the first quarter of 1995. Net property additions were $483 million in 1995, $418 million in 1994 and $309 million in 1993. These expenditures were primarily for equipment and tooling related to product improvements, more efficient production methods, replacement for normal wear and tear, and more stringent governmental energy and environmental regulations. Investment in the financial services business resulted in a net $2 million source of cash in first quarter of 1996 compared to a net $47 million use of cash in the first quarter of 1995 reflecting the expansion of WFC's inventory finance business offset by a drop in the consumer finance business due to repayments outpacing originations, as well as the continued liquidation of WFC's discontinued investment portfolios. Investment in the financial services business resulted in $289 million of net WFC financing receivables originated in 1995 compared to $17 million in 1994 and $285 million in 1993 of net cash receipts from WFC financing receivables. Other investing activities during the past three years included business dispositions and acquisitions. During 1995, the Company expanded its presence in Asia by acquiring controlling interests in three existing manufacturing companies and completing three new joint ventures. In November 1995, the Company acquired a majority interest in Raybo Air Conditioner Manufacturing Company ("Raybo"), a Chinese manufacturer and marketer of air conditioners, for about $22 million in cash. Raybo annual sales were about $20 million for its fiscal year 1994. In May 1995, the Company acquired a majority interest in Shunde SMC Microwave Products Co., Ltd. ("SMC"), a Chinese manufacturer and marketer of microwave ovens, for about $90 million in cash. SMC annual sales were about $100 million for its fiscal year 1994. In February 1995, the Company acquired a majority interest in Kelvinator of India, Ltd. ("KOI"), a manufacturer and marketer of refrigerators, for about $116 million in cash funded principally in 1995. As the transaction involved an issue of new KOI shares, most of the purchase price was invested as equity in KOI in support of planned plant and product line expansion. KOI annual sales were about S-12 $120 million for its fiscal year 1994. The Company intends to construct a new global no-frost refrigerator facility in India with production expected to begin in 1997. The Company's new Chinese joint ventures include a $17 million majority interest in Beijing Whirlpool Snowflake Electric Appliance Co., Ltd. to produce refrigerators; a $16 million majority interest in Whirlpool Narcissus (Shanghai) Co., Ltd. to produce washing machines; and a $5 million minority interest in Beijing Embraco Snowflake Compressor Co. Ltd. to produce compressors for refrigerators and air conditioners. The cash investments above include $9 million and $4 million to be paid in 1996 for the refrigerator and compressor joint ventures. Also, the Company plans to invest an additional $11 million in the washing machine joint venture in 1996 and 1997. In September 1994, the Company sold its minority interest in MFCC, a joint venture which manufactures and markets vacuum cleaners in the North American market. The sale resulted in cash proceeds of $44 million and a pre-tax gain of $26 million or $.24 per share. The after-tax gain on the sale was $18 million. In April 1994, the Company sold its European compressor operation to one of the Company's Brazilian affiliates for $106 million. The Company received 75% of the selling price in cash at the closing date with the remainder paid in 1995. The sale resulted in a pre-tax gain of $34 million but no significant gain or loss after taxes. The European compressor operation contributed gross sales of $213 million, including third party sales of $127 million and pre-tax earnings of $10 million in 1993. In April 1994, the Company made an additional $3 million investment in TVS Whirlpool Limited to become the majority partner in this Indian joint venture. The Company plans to invest an additional $14 million in 1996 to increase its interest in the joint venture, renamed Whirlpool Washing Machines Limited in 1995. In February 1994, the Company made an additional $3 million investment in Whirlpool Tatramat to become the majority partner in this Slovakian joint venture and contributed $3 million for a minority interest in a joint venture with Teco Electric and Machinery Co., Ltd., to market and distribute appliances in Taiwan. In 1994, the Company began construction of a new $100 million cooking products facility in Tulsa, Oklahoma, to manufacture freestanding gas and electric ranges for the North American appliance market beginning in April 1996. In October 1993, the Company made an additional $26 million investment in Brastemp (now Multibras S.A.). In April 1993, as part of the Company's Latin America strategy, the Company's Argentine subsidiary sold additional voting stock, representing a 40% interest, to one of the Company's Brazilian affiliates for $7 million. In July 1993, the Company sold its refrigerator plant in Barcelona, Spain for $4 million, resulting in an $8 million pre-tax loss but no significant gain or loss after taxes. Financing Activities Dividends paid to shareholders totaled $50 million in the first quarter of 1996 compared to $25 million in the first quarter of 1995. The 1996 dividends paid includes payment of both the first quarter 1996 dividend and the fourth quarter 1995 dividend. Dividends to shareholders totaled $100 million in 1995, $90 million in 1994 and $85 million in 1993. The Company's borrowings increased by $217 million during the first quarter of 1996, excluding the effect of currency fluctuations, primarily to fund property additions and seasonal working capital needs. The Company's borrowings increased by $747 million in 1995, excluding the effect of currency translation and $50 million of borrowings assumed in acquisitions, primarily to fund property additions, origination of financing receivables and Asian acquisitions. S-13 In December 1994, the Company announced plans to repurchase up to five percent of the outstanding shares of common stock. The treasury shares will be used in employee stock-option, retirement, and other compensation programs and for general corporate purposes. Through the end of March 1996, the Company had repurchased approximately 966,000 shares for $51 million. The Company reduced borrowings by $33 million in 1994 primarily due to the continued liquidation of WFC's commercial lending portfolio. The Company reduced borrowings by $583 million in 1993 due to strong operating cash flow and the liquidation of WFC's commercial lending portfolio. In 1993, WFC completed a $75 million sale of preferred stock in a move consistent with plans to broaden the subsidiary's equity base and position it as a more financially independent business entity. The proceeds were used to repay intercompany debt to the Company. See Note 6 to the Company's consolidated financial statements. In 1993, the Company called $125 million of 9 1/8% Sinking Fund Debentures and terminated $100 million of related interest rate swap agreements resulting in an immaterial gain on extinguishment. The Company also terminated $400 million of interest rate swap agreements designated as hedges of long-term debt resulting in a deferred gain of $51 million which is being amortized as a reduction in interest expense over the life of the related debt. In 1993, WFC initiated a commercial paper program which currently authorizes the issuance of up to $1.7 billion. The 1993 net proceeds of $790 million were used to repay intercompany debt to the Company. FINANCIAL CONDITION AND OTHER MATTERS The financial position of the Company remains strong as evidenced by the March 31, 1996 balance sheet. As of such date, the Company's total assets were $8.0 billion and stockholders' equity was $1.9 billion. The overall debt to invested capital ratio at March 31, 1996 increased compared to December 31, 1995 and the overall debt to invested capital ratio at December 31, 1995 increased compared to December 31, 1994. The appliance business debt to invested capital ratio net of cash ("debt ratio") increased from 43% at December 31, 1995 to 47% at March 31, 1996 due primarily to seasonal working capital requirements and Asian acquisitions partially offset by the effect of European currency movements on the Company's hedging strategy. The appliance business debt ratio at December 31, 1995 was 39%. The increase during 1995 was due primarily to increased borrowings. See "Cash Flows--Financing Activities." As of December 31, 1995, convertible notes with principal amounts of $371 million had been converted into 2.7 million shares of the Company's common stock. The debt ratio was also affected by European currency movements due to a combination of foreign borrowings and the Company's hedging strategy related to European net assets. The financial services debt ratio at March 31, 1996 was down slightly compared to December 31, 1995. The 1995 financial services debt to invested capital ratio increased from December 31, 1994 due to higher investment levels compared to the prior year. The Company's debt continues to be rated investment grade by Moody's Investors Service, Inc., Standard and Poors and Duff & Phelps. Various European currency swaps and forward contracts serve as a hedge of net foreign currency cash flows and also hedge a portion of the Company's European net assets. Changes in the value of the swaps and forward contracts due to movements in exchange rates are included in the currency translation component of stockholders' equity if they relate to the European net asset hedge or otherwise in other income (expense). S-14 WFC's financing portfolio by business segment is as follows: MARCH 31, DECEMBER DECEMBER 1996 31, 1995 31, 1994 ---------- ---------- ---------- --- Inventory......................... $ 877 47% $ 857 46% $ 652 41% Consumer.......................... 495 27 531 29 386 24 Aerospace......................... 408 22 411 22 465 29 Other............................. 67 4 59 3 80 6 ------ --- ------ --- ------ --- $1,847 100% $1,858 100% $1,583 100% ====== === ====== === ====== === The aerospace portfolio is generally secured by newer (Stage III) aircraft on lease to various international airlines. Although the commercial airline industry seems to be stabilizing, the near-term outlook remains uncertain. Management believes the aerospace portfolio carrying value is appropriate. The Company is continuing to phase out of aerospace and highly leveraged commercial lending activities. The financial services industry is very competitive and various leasing companies, financial institutions and finance companies operate in the same markets as WFC. See Notes 1 and 3 of the Company's consolidated financial statements for a further description of WFC's business. WFC adopted Financial Accounting Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a Loan," effective January 1, 1995. The new rules require WFC to measure impaired loans based on the present value of expected future cash flows discounted at the loan's effective interest rate. Adoption of the new rules did not have a material effect on the Company's net earnings or financial position. The Company has external sources of capital available and believes it has adequate financial resources and liquidity to meet anticipated business needs and to fund future growth opportunities such as new products, acquisitions and joint ventures. BUSINESS PRODUCTS AND SERVICES The Company manufactures and markets a full line of major home appliances and related products for home and commercial use and provides certain inventory, consumer, and other financial services. The Company's principal products and financial services are as follows: MAJOR HOME APPLIANCES Home laundry appliances: automatic and semi-automatic washers; automatic dryers; coin-operated laundry machines; and combination washer-dryer units. Home refrigeration and room air conditioning equipment: refrigerator- freezers; upright and chest freezers; room air conditioners; dehumidifiers; and residential, commercial, and component ice makers. Home cooking appliances: free-standing and set-in ranges; built-in ovens and surface cooking units; microwave ovens; countertop cooking units; and range hoods. Other home appliances, products, and services: dishwashers; residential trash compactors; food waste disposers; portable appliances; hot water dispensers; water filtration products; oil radiators; water heaters; component parts, replacement parts, repair services and warranty contracts; and product kits. S-15 FINANCIAL SERVICES WFC provides inventory financing and factoring services, including stocking and display programs for retailers and distributors that market products manufactured by the Company plus other manufacturers. It also provides consumer financing services for retail sales, principally through WFNB, which offers consumer credit card programs. WFC also continues to manage down its aerospace financing and leasing portfolios. The Company purchases a portion of its product requirements from other manufacturers for resale by the Company. The Company purchases all of its requirements of range hoods, food waste disposers, upright and chest freezers (North America), hand mixers, food processors, and certain other miscellaneous products from other manufacturers for resale by the Company. Major home appliances are marketed and distributed in the United States under the WHIRLPOOL, KITCHENAID, ROPER, ESTATE, CHAMBERS, and COOLERATOR brand names through Company-owned sales branches primarily to retailers and builders. KITCHENAID portable appliances are sold to retailers either directly or through an independent representative organization. The Company sells product to the builder trade both directly and through contract distributors. Major home appliances are manufactured and/or distributed in Canada under the INGLIS, ADMIRAL, SPEED QUEEN, WHIRLPOOL, ESTATE, ROPER, and KITCHENAID brand names. Refrigerator-freezers, laundry products, room air conditioners, residential trash compactors, residential and component ice makers, cooking products, dishwashers, and other products are sold in limited quantities by the Company to other manufacturers and retailers for resale in North America under their respective brand names. The Company has been the principal supplier of home laundry appliances to Sears for almost 80 years. The Company is also the principal supplier to Sears of residential trash compactors and dehumidifiers and a major supplier to Sears of dishwashers, room air conditioners, and home refrigeration equipment. The Company also supplies Sears with certain other products for which the Company is not currently a major supplier. Sales of such other products to Sears are not significant to the Company's business. The Company supplies products to Sears for sale under Sears' KENMORE and SEARS brand names. Sears has also been a major outlet for the Company's WHIRLPOOL and KITCHENAID brand names since 1989. Sales to Sears are made without underlying merchandise agreements. In Europe, Whirlpool Europe markets and distributes its major home appliances through regional networks under a number of brand names. In 1990, Whirlpool Europe began an estimated $110 million program to introduce the WHIRLPOOL brand name to the European marketplace. Whirlpool Europe also markets products under the BAUKNECHT, IGNIS, and LADEN brand names. In certain Eastern European countries, products bearing the WHIRLPOOL and IGNIS brand names are presently sold through independent distributors. Whirlpool Europe also has company-owned sales subsidiaries in Hungary, Poland, the Czech Republic, Slovakia, and Greece and a representative office in Russia. Pursuant to the Company's joint venture agreement with Philips N.V. ("Philips"), except for certain limited exceptions and subject to certain phase-out provisions, neither Philips nor any subsidiary of Philips may engage directly or indirectly in the major domestic appliance business anywhere in the world until January 2, 1999. Whirlpool Europe also sells products carrying the WHIRLPOOL, BAUKNECHT, IGNIS, ALGOR, and FIDES brand names to the Company's wholly-owned sales companies in Asia and/or Latin America (Whirlpool Asia Appliance Group and the Latin America Appliance Group) and to independent distributors and retailers in Africa and the Middle East. In Latin America, the Company offers a broad range of products under well- recognized brand names such as WHIRLPOOL, BRASTEMP, CONSUL, and SEMER. S-16 In Asia, the Company markets and distributes its major home appliances through four operating regions: the Greater China region, based in Hong Kong, which includes the Peoples Republic of China and Hong Kong; the South Asia region, based in Delhi, which includes India, Pakistan, and other surrounding markets; the North Asia region, which includes Japan, Korea, the Philippines, and Taiwan; and the Southeast Asia--Australia region, which includes Southeast Asia, Australia, and New Zealand. The North Asia and Southeast Asia--Australia regions are based in Singapore. The Company markets and sells its products in Asia under the WHIRLPOOL, KITCHENAID, ROPER, IGNIS, BAUKNECHT, SMC, NARCISSUS, SNOWFLAKE, RAYBO, TVS, and KELVINATOR brand names. The Company's Asian strategy is to establish a manufacturing and marketing presence in Asia through a number of joint ventures. See "Management's Discussion and Analysis of Results of Operations and Financial Condition." The Company's interests outside the United States and Western Europe are subject to risks which may be greater than or in addition to those risks currently present in the United States and Western Europe. Such risks may include high inflation, the need for governmental approval of and restrictions on certain financial and other corporate transactions and new or continued business operations, government price controls, restrictions on the remittance of dividends, interest, royalties, and other payments, and the convertibility of local currencies, restrictions on imports and exports, duties, political and economic developments and instability, the possibility of expropriation, uncertainty as to the enforceability of commercial rights and trademarks, and various types of local participation in ownership. In Brazil, the Company's minority equity interests earned profits in 1994 and 1995 due to cost control, productivity improvements, and an increase in consumer demand. However, issues such as economic volatility and exchange rate changes continue to affect consumer purchasing power and the appliance industry as a whole. WHIRLPOOL FINANCIAL CORPORATION Whirlpool Financial provides diversified financial services to businesses and consumers throughout the United States and Canada and factoring, inventory, and display financing activities in Europe, Mexico, and Argentina. WFC conducts its business through three divisions: the Inventory Finance Division, which provides floorplan financing and display programs to retailers; the Consumer Finance Division, which provides installment financing and, through WFNB, WFC's credit card bank, consumer credit card programs; and the International Division, operated through Whirlpool Financial Corporation International, Whirlpool Financial Latin America Inc., and Whirlpool Financial Corporation Overseas, wholly owned subsidiaries of WFC, which provide factoring, inventory, and display financing for retailers of products of Whirlpool Europe, Whirlpool Argentina, and Vitromatic, Whirlpool's joint venture company in Mexico. Inventory financing represents the largest segment of WFC's business, providing services for manufacturers, distributors, and retailers in the appliance, consumer electronics, outdoor power equipment, residential heating and cooling equipment, and music industries. WFC has been phasing out its aerospace financing and leasing portfolios since 1993. COMPETITION The major home appliance business is a highly competitive industry. The Company believes that, in terms of units sold annually, it is the largest United States manufacturer of home laundry appliances and one of the largest United States manufacturers of home refrigeration and room air conditioning equipment and dishwashers. The Company estimates that during 1995 there were approximately five United States manufacturers of home laundry appliances, 15 United States manufacturers of home refrigeration and room air conditioning equipment, and four United States manufacturers of dishwashers. Competition in the North American major home appliance business is based on a wide variety of factors, including principally product features, price, product quality and performance, service, warranty, advertising, and promotion. S-17 The Company believes that Whirlpool Europe, in terms of units sold annually, is one of the three largest manufacturers and marketers of major home appliance products in Europe. The Company estimates that during 1995 there were approximately 35 Western European manufacturers of major home appliances, the majority of which manufacture a limited range of products for a specific geographic region. In recent years, there has been significant merger and acquisition activity as manufacturers seek to broaden product lines and expand geographic markets, and the Company believes that this trend will continue. The Company believes that, with Whirlpool Europe, it is in a favorable position relative to its competitors because it has an experienced Western European sales network, balanced sales throughout the Western European market under well-recognized brand names, manufacturing facilities located in different countries, and the ability to customize its products to meet the specific needs of diverse consumer groups. Competition in the European major home appliance business is based on a wide variety of factors, including principally product features, price, product quality and performance, service, warranty, advertising, and promotion. With respect to microwave ovens, Western European manufacturers face competition from manufacturers in Asia, primarily Japan and South Korea. The Company believes that, together with its Brazilian affiliates, it is well-positioned in the Latin American appliance market due to its ability to offer a broad range of products under well-recognized brand names such as WHIRLPOOL, BRASTEMP, CONSUL, and SEMER to meet the specific requirements of consumers in the region. The Company estimates that during 1995 there were approximately 65 manufacturers of home appliances in the region. Competition in the Latin American home appliance business is based on a wide variety of factors, including principally product features, price, product quality and performance, service, warranty, advertising, and promotion. In Latin America there are trends toward privatization of government-owned businesses and a liberalization of investment and trade restrictions. In Asia, the major domestic appliance market is characterized by rapid growth and is dominated primarily by Asian diversified industrial manufacturers whose significant size and scope of operations enable them to achieve economies of scale. The Company estimates that during 1995 there were approximately 50 Asian manufacturers of major home appliances. Competition in the Asian home appliance business is based on a wide variety of factors, including principally local production capabilities, product features, price, product quality, and performance. As a result of its global expansion, the Company believes it may have a competitive advantage by reason of its ability to share engineering breakthroughs across regions, transfer best practices, and economically purchase raw materials and component parts in large volumes. The financial services industry is an intensely competitive business. Factors affecting competition include new entrants into a market experiencing only moderate growth and the continuing pressure to improve investment returns in the financial services industry. With respect to inventory financing, there has been a trend toward consolidation resulting in five dominant companies in the United States market. In terms of total assets, WFC is the smallest of these companies. WFC believes it has a competitive advantage due to its strong relationship with the Company and other distribution networks. In the inventory finance business, WFC's strategy is to exploit niches within the consumer durables retail market. In consumer finance, WFC utilizes the same retailer relationships to address the needs of their consumers through private label credit card programs. The consumer finance market is highly fragmented with numerous competitors, none of which has a dominant market share. S-18 DESCRIPTION OF DEBENTURES The following description of the particular terms of the debentures (the "Debentures") offered hereby (referred to in the Prospectus as "Offered Debt Securities") supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of Debt Securities set forth in the accompanying Prospectus, to which description reference is hereby made. The statements herein concerning the Debentures and the Indenture dated April 15, 1990 (as amended by the Trust Indenture Reform Act of 1990, the "Indenture") between the Company and Citibank, N.A., under which the Debentures will be issued do not purport to be complete. All such statements are qualified in their entirety by reference to the accompanying Prospectus and the provisions of the Indenture, which has been filed with the Securities and Exchange Commission. As of June 30, 1996, the Company had $443.5 million outstanding under the Indenture. GENERAL The Debentures will be limited to $200,000,000 aggregate principal amount and will mature on , 2016. The Debentures will bear interest from , 1996, or from the most recent interest payment date to which interest has been paid or provided for, payable semiannually on and of each year, commencing , 1997, to the person in whose name the Debentures (or any predecessor Debentures) is registered at the close of business on and , as the case may be, next preceding such interest payment date. The Debentures are not redeemable or repayable prior to maturity and do not provide for any sinking fund. Principal and interest will be payable at the office or offices or agency maintained by the Company for such purposes as contemplated by the Indenture, including, with respect to payments of interest, by mailing of checks to the registered holders (provided that so long as the Depositary is the registered holder, payments of interest will be made to the Depositary by wire transfers). DEFEASANCE AND COVENANT DEFEASANCE The provisions of Sections 10.1(B)(ii) and 10.1(B)(iii) of the Indenture relating to defeasance and covenant defeasance described under the caption "Description of Debt Securities--Defeasance and Covenant Defeasance" in the Prospectus shall apply to the Debentures. BOOK-ENTRY SYSTEM The Debentures will be issued in the form of one or more fully registered global securities (the "Global Securities"), which will be deposited with, or on behalf of, The Depository Trust Company, New York, New York (the "Depositary") and registered in the name of the Depositary's nominee. Except as set forth below, the Global Securities may be transferred, in whole or in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. The Depositary has advised the Company and the Underwriters as follows: The Depositary is a limited-purpose trust company that was created to hold securities for its participating organizations (the "Participants") and to facilitate the clearance and settlement of securities transactions between Participants in such securities through electronic book-entry changes in accounts of its Participants. Participants include securities brokers and dealers (including the Underwriters), banks (including the Trustee) and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("indirect participants"). Persons who are not Participants may beneficially own securities held by the Depositary only through Participants or indirect participants. S-19 The Depositary advises that pursuant to procedures established by it (i) upon issuance of the Debentures, the Depositary will credit the accounts of Participants designated by the Underwriters with the principal amounts of the Debentures purchased by the Underwriters and (ii) ownership of beneficial interests in the Global Securities will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary (with respect to the Participants' interests), the Participants and the indirect participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in the Global Securities is limited to such extent. So long as a nominee of the Depositary is the registered owner of the Global Securities, such nominee for all purposes will be considered the sole owner or holder of such Debentures under the Indenture. Except as provided below, owners of beneficial interests in the Global Securities will not be entitled to have Debentures registered in their names, will not receive or be entitled to receive physical delivery of Debentures in definitive form, and will not be considered the owners or holders thereof under the Indenture. The Trustee, any Paying Agent and the Security Registrar will not have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Securities, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Principal and interest payments on the Debentures registered in the name of the Depositary's nominee will be made by the Trustee to the Depositary's nominee as the registered owner of the Global Securities. Under the terms of the Indenture, the Company and the Trustee will treat the persons in whose names the Debentures are registered as the owners of such Debentures for the purpose of receiving payment of principal and interest on the Debentures and for all other purposes whatsoever. Therefore, neither the Company, the Trustee nor any Paying Agent has any direct responsibility or liability for the payment of principal or interest on the Debentures to owners of beneficial interests in the Global Securities. The Depositary has advised the Company and the Trustee that its present practice is, upon receipt of any payment of principal or interest, to immediately credit the accounts of the Participants with such payment in amounts proportionate to their respective holdings in principal amount of beneficial interests in the Global Securities as shown on the records of the Depositary. The Depositary's current practice is to credit such accounts, as to interest, in next-day funds and, as to principal, in same-day funds. Payments by Participants and indirect participants to owners of beneficial interests in the Global Securities will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of the Participants or indirect participants. If the Depositary is at any time unwilling or unable to continue as depository and a successor depository is not appointed by the Company within 90 days, the Company will issue Debentures in definitive form in exchange for the Global Securities. In addition, the Company may at any time determine not to have the Debentures represented by Global Securities and, in such event, will issue Debentures in definitive form in exchange for the Global Securities. In either instance, an owner of a beneficial interest in the Global Securities will be entitled to have Debentures equal in principal amount to such beneficial interest registered in its name and will be entitled to physical delivery of such Debentures in definitive form. Debentures so issued in the definitive form will be issued in denominations of $1,000 and integral multiples thereof and will be issued in registered form only, without coupons. S-20 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement and the Pricing Agreement, the Company has agreed to sell to each of the Underwriters named below (the "Underwriters"), and each of the Underwriters has severally agreed to purchase, the principal amount of Debentures set forth opposite its name below: PRINCIPAL AMOUNT UNDERWRITER OF DEBENTURES ----------- ------------- Goldman, Sachs & Co............................................ $ Salomon Brothers Inc........................................... ------------ Total...................................................... $200,000,000 ============ Under the terms and conditions of the Underwriting Agreement and the Pricing Agreement, the Underwriters have committed to take and pay for all of the Debentures, if any are taken. The Company has been advised by the Underwriters that they propose to offer the Debentures in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement and in part to certain securities dealers at such price less a concession of % of the principal amount of the Debentures. The Underwriters may allow, and such dealers may reallow, a concession not to exceed % of the principal amount of the Debentures to certain other brokers and dealers. After the Debentures are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Underwriters. The Debentures are a new issue of securities with no established trading market. The Company has been advised by the Underwriters that the Underwriters intend to make a market in the Debentures, but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Debentures. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. S-21 PROSPECTUS $500,000,000 WHIRLPOOL CORPORATION DEBT SECURITIES AND WARRANTS TO PURCHASE DEBT SECURITIES ---------------- Whirlpool Corporation ("Whirlpool" or the "Company") from time to time may offer its debt securities consisting of debentures, notes and/or other unsecured evidences of indebtedness (the "Debt Securities") (which Debt Securities may include warrants (the "Warrants") in respect thereof) in an aggregate principal amount of up to $500,000,000 (including the principal amounts of Debt Securities deliverable upon exercise of Warrants). The Debt Securities may be offered as separate series, in amounts, at prices and on terms to be determined at the time of sale and to be set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The Company may sell Debt Securities to or through underwriters, and also may sell Debt Securities directly to other purchasers or through agents or dealers. See "Plan of Distribution." The terms of the Debt Securities, including, where applicable, the specific designation, aggregate principal amount, denominations, maturity, rate of interest (which may be fixed or variable), time of payment of interest, the currency or currency units in which payments in respect of Debt Securities may be made, terms for redemption, the public offering price, the names of any underwriters or agents, the principal amounts to be purchased by underwriters and the compensation of such underwriters or agents, terms of the Warrants (if applicable) and the other terms in connection with the offering and sale of the Debt Securities in respect of which this Prospectus is being delivered are to be set forth in the Prospectus Supplement with respect to such Debt Securities accompanying this Prospectus. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACYOF THIS PROSPECTUS. ANY REPRESENTATION TOTHE CONTRARY IS A CRIMINAL OFFENSE. ---------------- GOLDMAN, SACHS & CO. ---------------- The date of this Prospectus is July 19, 1996. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF SUCH PROSPECTUS OR PROSPECTUS SUPPLEMENT OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH PROSPECTUS OR PROSPECTUS SUPPLEMENT. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the offices of the Commission, 450 Fifth Street, N.W., Washington, D.C.; 500 West Madison Street, Chicago, Illinois; 7 World Trade Center, New York, New York; and at the Commission's World Wide Web site at http://www.sec.gov; and copies of such material can be obtained from the Public Reference Section of the Commission at Washington, D.C. 20549 at prescribed rates. Reports, proxy statements and other information concerning the Company can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, and the Midwest Stock Exchange, Incorporated, 440 South LaSalle Street, Chicago, Illinois 60605. The Company has securities listed on each such exchange. The Company has filed with the Commission a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933 (the "Act") with respect to the Debt Securities offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. The Registration Statement and the exhibits thereto may be inspected without charge at the office of the Commission and copies thereof may be obtained from the Commission upon payment of prescribed fees. Statements contained herein concerning any document filed as an exhibit to the Registration Statement do not purport to be complete and, in such instance, are qualified in their entireties by reference to the copy of such document as filed. DOCUMENTS INCORPORATED BY REFERENCE The following documents filed by the Company (SEC File No. 1-3932) with the Commission are incorporated in and made a part of this Prospectus by reference, except to the extent that any statement or information contained therein is modified, superseded or replaced by a statement or information contained herein or in any other subsequently filed document incorporated herein by reference: (1) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (2) the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (3) the Company's Current Reports on Form 8-K dated March 20, 1996, April 23, 1996, June 5, 1996, and July 16, 1996; and (4) from the date of filing such documents, all documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Debt Securities. A copy of any or all of the documents incorporated herein by reference (other than exhibits unless such exhibits are specifically incorporated by reference in any such document) will be provided, without charge, to any person to whom a copy of this Prospectus is delivered, upon written or oral request. Requests for such copies should be directed to the Corporate Secretary of the Company, Benton Harbor, Michigan 49022-2692 (telephone 616/923-3223). 2 THE COMPANY Whirlpool Corporation, the leading worldwide manufacturer and marketer of major home appliances, was incorporated in 1955 under the laws of Delaware as the successor to a business that traces its origin to 1898. The Company manufactures and markets a full line of major home appliances and related products for home and commercial use and provides certain inventory, consumer, and other financial services. The Company manufactures its products in twelve countries and markets its products under eleven major brand names in approximately 140 countries. Major home appliances are marketed and distributed in the United States under the WHIRLPOOL, KITCHENAID, ROPER, ESTATE, CHAMBERS, and COOLERATOR brand names through Company-owned sales branches primarily to retailers and builders. KITCHENAID portable appliances are sold to retailers either directly or through an independent representative organization. The Company sells product to the builder trade both directly and through contract distributors. Major home appliances are manufactured and/or distributed in Canada under the INGLIS, ADMIRAL, SPEED QUEEN, WHIRLPOOL, ESTATE, ROPER, and KITCHENAID brand names. Refrigerator-freezers, laundry products, room air conditioners, residential trash compactors, residential and component ice makers, cooking products, dishwashers, and other products are sold in limited quantities by the Company to other manufacturers and retailers for resale in North America under their respective brand names. The Company has been the principal supplier of home laundry appliances to Sears, Roebuck and Co. ("Sears") for almost 80 years. The Company is also the principal supplier to Sears of residential trash compactors and dehumidifiers and a major supplier to Sears of dishwashers, room air conditioners, and home refrigeration equipment. The Company also supplies Sears with certain other products for which the Company is not currently a major supplier. Sales of such other products to Sears are not significant to the Company's business. The Company supplies products to Sears for sale under Sears' KENMORE and SEARS brand names. Sears has also been a major outlet for the Company's WHIRLPOOL and KITCHENAID brand names since 1989. Sales to Sears are made without underlying merchandise agreements. In Europe, Whirlpool Europe markets and distributes its major home appliances through regional networks under a number of brand names. In 1990, Whirlpool Europe began an estimated $110 million program to introduce the WHIRLPOOL brand name to the European marketplace. Whirlpool Europe also markets products under the BAUKNECHT, IGNIS, and LADEN brand names. In certain Eastern European countries, products bearing the WHIRLPOOL and IGNIS brand names are presently sold through independent distributors. Whirlpool Europe also has company-owned sales subsidiaries in Hungary, Poland, the Czech Republic, Slovakia, and Greece and a representative office in Russia. Pursuant to the Company's joint venture agreement with Philips N.V. ("Philips"), except for certain limited exceptions and subject to certain phase-out provisions, neither Philips nor any subsidiary of Philips may engage directly or indirectly in the major domestic appliance business anywhere in the world until January 2, 1999. Whirlpool Europe also sells products carrying the WHIRLPOOL, BAUKNECHT, IGNIS, ALGOR, and FIDES brand names to the Company's wholly-owned sales companies in Asia and/or Latin America (Whirlpool Asia Appliance Group and the Latin America Appliance Group) and to independent distributors and retailers in Africa and the Middle East. In Latin America, the Company offers a broad range of products under well- recognized brand names such as WHIRLPOOL, BRASTEMP, CONSUL, and SEMER. In Asia, the Company markets and distributes its major home appliances through four operating regions: the Greater China region, based in Hong Kong, which includes the Peoples Republic of China 3 and Hong Kong; the South Asia region, based in Delhi, which includes India, Pakistan, and other surrounding markets; the North Asia region, which includes Japan, Korea, the Philippines, and Taiwan; and the Southeast Asia--Australia region, which includes Southeast Asia, Australia, and New Zealand. The North Asia and Southeast Asia--Australia regions are based in Singapore. The Company markets and sells its products in Asia under the WHIRLPOOL, KITCHENAID, ROPER, IGNIS, BAUKNECHT, SMC, NARCISSUS, SNOWFLAKE, RAYBO, TVS, and KELVINATOR brand names. Whirlpool Financial Corporation ("WFC") provides diversified financial services to businesses and consumers throughout the United States and Canada and factoring, inventory, and display financing activities in Europe, Mexico, and Argentina. WFC conducts its business through three divisions: the Inventory Finance Division, which provides floorplan financing and display programs to retailers; the Consumer Finance Division, which provides installment financing and, through Whirlpool Financial National Bank ("WFNB"), WFC's credit card bank, consumer credit card programs; and the International Division, operated through Whirlpool Financial Corporation International, Whirlpool Financial Latin America Inc., and Whirlpool Financial Corporation Overseas, wholly owned subsidiaries of WFC, which provide factoring, inventory, and display financing for retailers of products of Whirlpool Europe, Whirlpool Argentina, and Vitromatic, Whirlpool's joint venture company in Mexico. Inventory financing represents the largest segment of WFC's business, providing services for manufacturers, distributors, and retailers in the appliance, consumer electronics, outdoor power equipment, residential heating and cooling equipment, and music industries. WFC has been phasing out its aerospace financing and leasing portfolios since 1993. The Company was incorporated in 1955 under the laws of Delaware and is the successor to a business that began in 1898. The Company's principal executive offices are located at Benton Harbor, Michigan 49022-2692 (telephone 616/923- 5000). RATIOS OF EARNINGS TO FIXED CHARGES The following table sets forth the ratios (unaudited) of earnings to fixed charges for Whirlpool and its consolidated subsidiaries for the three months ended March 31, 1996 and for each of the years ended December 31, 1995, 1994, 1993, 1992, and 1991. THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------ 1996 1995 1994 1993 1992 1991 --------- ---- ---- ---- ---- ---- Ratio of earnings to fixed charges(1).... 1.67 2.04 2.54 2.97 2.53 2.25 - -------- (1) Earnings consist of pre-tax earnings from continuing operations before fixed charges, minority interest and the Company's equity in undistributed net earnings of less than 50% owned affiliated companies, the investment in which is accounted for by the equity method. Fixed charges consist of interest on indebtedness, amortization of debt expense and premium, and that portion of rentals representative of interest. USE OF PROCEEDS Except as otherwise provided in the Prospectus Supplement, the net proceeds received by the Company from the sale of the Debt Securities will be utilized by the Company as required from time to time for working capital and expansion of the businesses of the Company and its subsidiaries, including Whirlpool Financial, for the repayment of existing indebtedness and for other general corporate purposes. Net proceeds to be used by a subsidiary of the Company will, in general, be loaned to such subsidiary by the Company. To the extent not theretofore utilized, the net proceeds 4 received by the Company may be placed in short-term investments, including commercial paper and certificates of deposit, or utilized to reduce other short-term borrowings. Except as may be indicated in the Prospectus Supplement, no specific determination has been made as to the use of the proceeds of the Debt Securities in respect of which the Prospectus is being delivered. The precise amount and timing of sales of Debt Securities will depend on, among other things, the funding requirements of the Company and its subsidiaries, market conditions and the availability and cost of other funds to the Company from time to time. DESCRIPTION OF DEBT SECURITIES The following description of the terms of the Debt Securities sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement (the "Offered Debt Securities") and the extent, if any, to which such general provisions may not apply thereto will be described in the Prospectus Supplement relating to such Offered Debt Securities. The Debt Securities are to be issued in one or more series (each such series a "Series") under an Indenture dated as of April 15, 1990 (as amended by the Trust Indenture Reform Act of 1990, the "Indenture") between the Company and Citibank, N.A., as Trustee (the "Trustee"), a copy of which is filed as an exhibit to the Registration Statement. The following summaries of certain provisions of the Debt Securities and the Indenture do not purport to be complete and are subject to, and are qualified in their entireties by reference to, all of the provisions of the Indenture, including the definitions therein of certain terms. Whenever particular provisions or defined terms in the Indenture are referred to herein, such provisions or defined terms are incorporated by reference herein. Section references used herein are references to the Indenture. GENERAL The Indenture does not limit the amount of debt securities which can be issued thereunder and provides that debt securities of any series may be issued thereunder up to the aggregate principal amount which may be authorized from time to time by the Company. The Indenture does not limit the amount of other indebtedness or securities, other than certain secured indebtedness as described below, which may be issued by the Company. All Debt Securities will be unsecured and will rank pari passu with all other unsecured and unsubordinated indebtedness of the Company. The Trustee will authenticate and deliver Debt Securities executed and delivered to it by the Company as set forth in the Indenture. Reference is made to the Prospectus Supplement for the following and other possible terms of each Series of the Offered Debt Securities in respect of which this Prospectus is being delivered: (i) the title of the Offered Debt Securities; (ii) any limit upon the aggregate principal amount of the Offered Debt Securities; (iii) if other than 100% of the principal amount, the percentage of their principal amount at which the Offered Debt Securities will be offered; (iv) the date or dates on which the principal of the Offered Debt Securities will be payable; (v) the rate or rates (or method of determination thereof), if any, at which the Offered Debt Securities will bear interest, the date or dates from which any such interest will accrue and on which such interest will be payable, and, with respect to Offered Debt Securities in registered form, the record dates for the determination of the holders to who interest is payable; (vi) if other than as set forth herein, the place or places where the principal of and interest, if any, on the Offered Debt Securities will be payable; (vii) the price or prices at which, the period or periods within which and the terms and conditions upon which Offered Debt Securities may be redeemed, in whole or in part, at the option of the Company, pursuant to any sinking fund or otherwise; (viii) if other than the principal amount thereof, the portion of the principal amount of the Offered Debt Securities which will be payable upon declaration of acceleration of the maturity thereof; 5 (ix) the obligation, if any, of the Company to redeem, purchase or repay Offered Debt Securities, whether pursuant to any sinking fund or analogous provisions or pursuant to other provisions set forth therein or at the option of a holder thereof; (x) whether the Offered Debt Securities will be issuable in registered or bearer form or both, and the rights of the holders to exchange Offered Debt Securities in bearer form for Offered Debt Securities in registered form and vice versa and the circumstances under which any such exchanges, if permitted, may be made; (xi) whether and under what circumstances the Company will pay additional amounts on the Offered Debt Securities held by a person who is not a U.S. Person in respect of taxes or similar charges withheld or deducted and, if so, whether the Company will have the option to redeem such Offered Debt Securities rather than pay such additional amounts; (xii) whether and under what circumstances the Offered Debt Securities are convertible into Debt Securities of a different Series; (xiii) information with respect to Warrants, if any; (xiv) the currency or currency unit in which the Offered Debt Securities are issued or payable; (xv) whether the Offered Debt Securities will be represented in whole or in part by one or more global notes registered in the name of a depository or its nominee; and (xvi) any other terms or conditions not inconsistent with the provisions of the Indenture upon which the Offered Debt Securities will be offered. (Section 2.3) "Principal" when used herein includes, when appropriate, the premium, if any, on the Debt Securities. One or more Series of Debt Securities may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates. Federal income tax consequences and special considerations applicable thereto will be described in the Prospectus Supplement or Prospectus Supplements relating to any such Series of Debt Securities. In general, federal income tax consequences applicable to a Series of Debt Securities will be described in the Prospectus Supplement relating thereto, to the extent applicable. Unless otherwise provided in the Prospectus Supplement relating to any Offered Debt Securities, principal and interest, if any, will be payable, and the Debt Securities will be transferable or exchangeable, at the office or offices or agency maintained by the Company for such purposes, provided that payment of interest on any registered Debt Securities will be paid at such place of payment by check mailed to the persons entitled thereto at the addresses of such persons appearing on the Security register. Interest on registered Debt Securities will be payable on any interest payment date to the persons in whose name the Debt Securities are registered at the close of business on the record date with respect to such interest payment date. The Debt Securities may be issued in registered form or bearer form or both as specified in the terms of the Series. Additionally, the Debt Securities may be represented in whole or in part by one or more global notes registered in the name of a depository or its nominee and, if so represented, beneficial interests in such global note will be shown on, and transfers thereof will be effected only through, records maintained by the designated depository and its participants. Debt Securities in bearer form will be transferable by delivery. (Section 2.8) To the extent set forth in the Prospectus Supplement relating to such Debt Securities, interest on Debt Securities in bearer form will be payable only against presentation and surrender of the coupons for the interest installments evidenced thereby as they mature at a paying agency of the Company located outside of the United States and its possessions. (Section 3.1) The Company will maintain such an agency for a period of two years (or any period thereafter for which it is necessary to conform to United States tax laws or regulations) after the principal of such Debt Securities has become due and payable. (Section 3.2) The Debt Securities offered hereby will be issued in denominations of $1,000 or any whole multiple of $1,000 or the equivalent thereof in foreign denominated currency or currency units, unless otherwise specified in the Prospectus Supplement relating to any Offered Debt Securities. (Section 2.7) The Indenture requires the annual filing by the Company with the Trustee of a certificate as to compliance with certain covenants contained in the Indenture. (Section 3.5) 6 The Company will comply with Section 14(e) under the Exchange Act, and any other tender offer rules under the Exchange Act which may then be applicable, in connection with any obligation of the Company to purchase Offered Debt Securities at the option of the holders thereof. Any such obligation applicable to a Series of Debt Securities will be described in the Prospectus Supplement or Prospectus Supplements relating thereto. The Company may at any time purchase Debt Securities at any price in the open market or otherwise. Debt Securities so purchased by the Company may, at its sole option, be held, resold or surrendered to the Trustee for cancellation. Unless otherwise described in a Prospectus Supplement relating to any Offered Debt Securities, there are no covenants or provisions contained in the Indenture which may afford the holders of Offered Debt Securities direct protection in the event of a highly leveraged transaction involving the Company. EXCHANGE OF SECURITIES Registered Debt Securities may be exchanged for an equal aggregate principal amount of registered Debt Securities of the same Series and date of maturity in such authorized denominations as may be requested upon surrender of the registered Debt Securities at an agency of the Company maintained for such purpose and upon fulfillment of all other requirements of such agent. (Section 2.8) No service charge will be made for any transfer or exchange of the Debt Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 2.8) To the extent and under the circumstances specified by the terms of a Series of Debt Securities authorized to be issued in registered form and bearer form, bearer Debt Securities may be exchanged for an equal aggregate principal amount of registered Debt Securities of the same Series and date of maturity in such authorized denominations as may be requested upon surrender of the bearer Debt Securities with all unpaid coupons relating thereto at an agency of the Company maintained for such purposes and upon fulfillment of all other requirements of such agent. (Section 2.8) The terms of a Series of Debt Securities will normally not permit registered Debt Securities to be exchanged for bearer Debt Securities. LIMITATIONS ON LIENS Unless otherwise indicated in the Prospectus Supplement, the Company will covenant that, so long as any of the Debt Securities of a Series remain outstanding, the Company will not, nor will it permit any Restricted Subsidiary to, secure indebtedness for money borrowed (hereinafter referred to as "Debt") by placing a Lien on any Principal Property now or hereafter owned or leased by the Company or any Restricted Subsidiary or on any shares of stock or Debt of any Restricted Subsidiary without equally and ratably securing the Debt Securities of such Series, unless (i) the aggregate principal amount of such secured Debt then outstanding plus (ii) all Attributable Debt of the Company and its Restricted Subsidiaries in respect of sale and leaseback transactions described below covering Principal Properties (other than sale and leaseback transactions under (b) of the following paragraph) does not exceed an amount equal to 10% of Consolidated Net Tangible Assets. This restriction will not apply to, and there shall be excluded in computing secured Debt for purposes of this restriction, certain permitted Liens, including (a) Liens existing as of the date of the Indenture, (b) Liens on property or assets of, or on any shares of stock or Debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary, (c) Liens on property or assets or shares of stock or Debt existing at the time of acquisition and certain purchase money or similar Liens, (d) Liens to secure certain development, operation, construction, alteration, repair or improvement costs, (e) Liens in favor of, or which secure Debt owing to, the Company or a Restricted Subsidiary, (f) Liens in connection with 7 government contracts, including the assignment of moneys due or to come due thereon, (g) certain Liens in connection with legal proceedings or arising in the ordinary course of business and not in connection with the borrowing of money, (h) Liens on property securing tax-exempt obligations issued by a domestic governmental issuer to finance the cost of acquisition or construction of such property, and (i) extensions, substitutions, replacements or renewals of the foregoing. (Section 3.9) RESTRICTIONS ON SALE AND LEASEBACKS Unless otherwise indicated in the Prospectus Supplement, the Company will covenant that, so long as any of the Debt Securities of a Series remain outstanding, the Company will not, nor will it permit any Restricted Subsidiary to, enter into any sale and leaseback transaction (except a lease for a period not exceeding three years) after the date of the Indenture covering any Principal Property which was or is owned or leased by the Company or a Restricted Subsidiary and which has been or is to be sold or transferred more than 120 days after such property has been owned by the Company or such Restricted Subsidiary and completion of construction and commencement of full operation thereof, unless (a) the Attributable Debt in respect thereto and all other sale and leaseback transactions entered into after the date of the Indenture (other than those the proceeds of which are applied to reduce indebtedness under (b) following), plus the aggregate principal amount of then outstanding secured Debt not otherwise permitted or excepted without equally and ratably securing the Debt Securities, does not exceed 10% of Consolidated Net Tangible Assets, or (b) an amount equal to the greater of the net proceeds of the sale or the fair market value of the Principal Property leased is applied within 120 days after the sale or transfer to the voluntary retirement of indebtedness (including Debt Securities) maturing more than one year thereafter. (Section 3.10) CERTAIN DEFINITIONS The term "Subsidiary" is defined to mean a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. The term "Restricted Subsidiary" is defined to mean any Subsidiary (a) substantially all the property of which is located, or substantially all the business of which is carried on, within the United States, or (b) which owns or leases any Principal Property; provided, however, that the term "Restricted Subsidiary" shall not include any Subsidiary (i) more than 80% of whose revenues during the four preceding calendar quarters, if any, were derived from, and more than 80% of whose assets are related to, the financing of foreign Subsidiaries, or the financing of sales or leasing to Persons other than the Company or any other Restricted Subsidiary, (ii) which is primarily engaged in holding or developing real estate or constructing buildings or designing, constructing or otherwise manufacturing structures, equipment, systems, machines, devices or facilities for the control or abatement of atmospheric pollutants or contaminants, water pollution, noise, odor or other pollution or waste disposal, (iii) which is a bank, insurance company or finance company, (iv) which is or was a "DISC" (Domestic International Sales Corporation) or a "FSC" (Foreign Sales Corporation), as defined in Sections 992 or 922, respectively, of the Internal Revenue Code of 1986, as amended (the "Code"), or which receives similar tax treatment under any subsequent amendments thereto or successor laws thereof, or (v) which is any other financial entity whose accounts as of the date of determination are not required to be consolidated with the accounts of the Company in its audited consolidated financial statements (but such Subsidiary shall be excluded pursuant to any of clauses (i) through (v) of this proviso only so long as it shall not own any Principal Property). The term "Principal Property" is defined to mean any building, structure or other facility, together with the land upon which it is erected and fixtures comprising a part thereof, owned or leased by the Company or any Restricted Subsidiary, used primarily for manufacturing and located in the United States, the gross book value on the books 8 of the Company or such Restricted Subsidiary (without deduction of any depreciation reserve) of which on the date as of which the determination is being made exceeds 1% of Consolidated Net Tangible Assets, other than any such building, structure or other facility or any portion thereof or any such fixture (together with the land upon which it is erected and fixtures comprising a part thereof) (i) which is financed by industrial development bonds which are tax exempt pursuant to Section 103 of the Code (or which receive similar tax treatment under any subsequent amendments thereto or successor laws thereof), or (ii) which, in the opinion of the Board of Directors of the Company, is not of material importance to the total business conducted by the Company and its Restricted Subsidiaries taken as a whole. The term "Attributable Debt," in respect of the sale and leaseback transactions described above, is defined to mean the amount determined by multiplying the greater, at the time such transaction is entered into, of (i) the fair value of the real property subject to such arrangement (as determined by the Company) or (ii) the net proceeds of the sale of such real property to the lender or investor, by a fraction of which the numerator is the unexpired initial term of the lease of such real property as of the date of determination and of which the denominator is the full initial term of such lease. Sale and leasebacks with respect to facilities financed with certain tax exempt securities are excepted from the definition. The term "Consolidated Net Tangible Assets" is defined to mean the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any thereof constituting Funded Debt by reason of being extendible or renewable), and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent balance sheet of the Company and its consolidated subsidiaries and computed in accordance with generally accepted accounting principles. The term "Funded Debt" is defined to mean all indebtedness for money borrowed, or evidenced by a bond, debenture, note or similar instrument or agreement whether or not for money borrowed, having a maturity of more than 12 months from the date as of which the amount thereof is to be determined or having a maturity of less than 12 months but by its terms being renewable or extendible beyond 12 months from such date at the option of the borrower. (Section 1.1) The term "Lien" is defined to mean any pledge, mortgage or other lien (including lease purchase, installment purchase and other title retention financing arrangements) on or in respect of any Principal Property owned or leased by the Company or any Restricted Subsidiary, or on any shares of stock or Debt of any Restricted Subsidiary. (Section 3.9) EVENTS OF DEFAULT An Event of Default with respect to the Debt Securities of any Series is defined in the Indenture as: (i) a failure to pay any interest on any Debt Security of that Series when due and payable, and continuance of such failure for a period of 30 days; (ii) failure to pay the principal on any Debt Security of that Series as and when the same shall become due and payable either at maturity, upon redemption (other than with respect to a sinking fund payment), by declaration or otherwise; (iii) failure to deposit any sinking fund payment when due in respect of that Series, and continuance of such failure for a period of 30 days; (iv) default in the performance, or breach, of any other covenant or warranty of the Company set forth in the Indenture not otherwise dealt with in Section 5.1 (other than a covenant or warranty included in the Indenture solely for the benefit of a Series of Securities other than that Series) and continuance of such default or breach for a period of 90 days after due notice by the Trustee or by the Holders of at least 25% in principal amount of the Outstanding Securities of that Series; (v) failure to pay any portion of the principal of any indebtedness for money borrowed by the Company (including Debt Securities of another Series), which indebtedness is in excess of $10,000,000 outstanding principal amount, when due and payable after the expiration of any applicable grace period with respect thereto or the acceleration of such indebtedness, if such acceleration is not annulled within 10 days after written notice as provided in the Indenture; and (vi) certain events of bankruptcy, insolvency or reorganization of the Company. (Section 5.1) Additional Events of Default may be prescribed for the benefit of holders of certain Series of Debt Securities which, if prescribed, will be described in the Prospectus Supplement relating to such Debt Securities. The Indenture 9 provides that the Trustee shall notify the holders of Debt Securities of each Series of all defaults known to it and affecting that Series within 90 days after the occurrence thereof unless such defaults shall have been cured before the giving of such notice (the term "default" or "defaults" for the purposes of this section of the Indenture is defined to mean any event or condition which is, or with notice or lapse of time or both would become, an Event of Default). The Indenture provides that notwithstanding the foregoing, except in the case of a default in the payment of the principal of or interest on any of the Debt Securities of such Series or any default in the payment of any sinking fund installment or analogous obligation in respect of any of the Debt Securities of such Series, the Trustee shall be protected in withholding such notice if the Trustee in good faith determines that the withholding of such notice is in the interests of the holders of Debt Securities of such Series. (Section 5.11) The Indenture provides that if an Event of Default with respect to any Series of Debt Securities shall have occurred and be continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of Debt Securities of that Series then outstanding may declare the principal amount (or, if the Debt Securities of that Series are Original Issue Discount Securities (as defined), such portion of the principal amount as may be specified in the term of that Series) of all the Debt Securities of that Series to be due and payable immediately, but upon certain conditions such declaration may be annulled. (Section 5.1) Any past defaults and the consequences thereof (except a default in the payment of principal of or interest on Debt Securities of that Series) may be waived by the holders of a majority in principal amount of the Debt Securities of that Series then outstanding. (Sections 5.1 and 5.10) The Indenture also permits the Company to omit compliance with certain covenants in the Indenture with respect to Debt Security of any Series upon waiver by the holders of a majority in principal amount of the Debt Securities of such Series then outstanding. (Section 3.11) Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default with respect to any Series of Debt Securities shall occur and be continuing, the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by the Indenture at the request or direction of any of the holders of that Series, unless such holders shall have offered to the Trustee reasonable security or indemnity. (Sections 6.1 and 6.2) Subject to such provisions for security or indemnification and certain limitations contained in the Indenture, the holders of a majority in aggregate principal amount of the Debt Securities of each Series affected by an Event of Default and then outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee under the Indenture or exercising any trust or power conferred on the Trustee with respect to the Debt Securities of that Series. (Section 5.9) No holder of any Debt Security of any Series will have any right by virtue or by availing of any provision of the Indenture to institute any proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to the Indenture or for any remedy thereunder, unless such holder shall have previously given the Trustee written notice of an Event of Default with respect to Debt Securities of that Series and unless also the holders of at least 25% in aggregate principal amount of the outstanding Debt Securities of that Series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee and the Trustee shall have failed to institute such proceeding within 60 days after its receipt of such request, and the Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Debt Securities of that Series a direction inconsistent with such request. (Section 5.6) However, the right of a holder of any Debt Security to receive payment of the principal of and any interest on such Debt Security on or after the due dates expressed in such Debt Security, or to institute suit for the enforcement of any such payment on or after such dates, shall not be impaired or affected without the consent of such holder. (Section 5.7) SATISFACTION AND DISCHARGE OF INDENTURE The Indenture with respect to any Series (except for certain specified surviving obligations including, among other things, the Company's obligation to pay the principal of and interest on the Debt 10 Securities of such Series) will be discharged and cancelled upon the satisfaction of certain conditions, including the payment of all the Debt Securities of such Series or the deposit with the Trustee of cash or appropriate Government Obligations (as defined) or a combination thereof sufficient for such payment or redemption in accordance with the Indenture and the terms of the Debt Securities of such Series. (Section 10.1) MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debt Securities of each Series at the time outstanding, to execute supplemental indentures adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture or any supplemental indenture with respect to the Debt Securities of such Series or modifying in any manner the rights of the holders of the Debt Securities of such Series; provided that no such supplemental indenture may (i) extend the final maturity of any Debt Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of any interest thereon, or reduce any amount payable on redemption thereof, or impair or affect the right of any holder of Debt Securities to institute suit for payment thereof or, if the Debt Securities provide therefor, any right of repayment at the option of the holders of the Debt Securities, without the consent of the holder of each Debt Security so affected, or (ii) reduce the aforesaid percentage of Debt Securities of such Series, the consent of the holders of which is required for any such supplemental indenture, without the consent of the holders of all Debt Securities of such Series so affected. (Section 8.2) Additionally, in certain prescribed instances, the Company and the Trustee may execute supplemental indentures without the consent of the holders of Debt Securities. (Section 8.1) DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides that, if such provision is made applicable to the Debt Securities of any Series pursuant to Section 2.3 of the Indenture, then the Company may elect either (a) to terminate (and be deemed to have satisfied) all its obligations with respect to such Debt Securities (except for the obligations to register the transfer or exchange of such Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or agency in respect of the Debt Securities, to compensate and indemnify the Trustee and to punctually, pay or cause to be paid the principal of, and interest on, all Debt Securities of such Series when due) ("defeasance") or (b) to be released from its obligations with respect to such Debt Securities under Sections 3.7, 3.8, 3.9 and 3.10 of the Indenture (being the restrictions described above under "Limitations on Liens" and "Restrictions on Sale and Leasebacks" and certain requirements as to maintenance of Principal Properties and payment of taxes and other claims) ("covenant defeasance"), upon the deposit with the Trustee, in trust for such purpose, of money and/or Government Obligations which through the payment of principal and interest in accordance with their terms (without consideration of any reinvestment) will provide money, in an amount sufficient (in the opinion of a nationally recognized firm of independent public accountants) to pay the principal of and interest, if any, on the Outstanding Debt Securities of such Series, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may be established only if, among other things, the Company has delivered to the Trustee an opinion of counsel (as specified in the Indenture) with regard to certain matters, including an opinion to the effect that the Holders of such Debt Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and discharge and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance or covenant defeasance, as the case may be, had not occurred. The Prospectus Supplement may further describe the provisions, if any, permitting defeasance or covenant defeasance with respect to the Debt Securities of any Series. (Section 10.1) 11 CONCERNING THE TRUSTEE The Company presently does, and may from time to time in the future, maintain lines of credit and have customary banking relationships with Citibank, N.A., the Trustee under the Indenture. The Company has several series of debt securities outstanding under the Indenture for which the Trustee is serving as trustee and the Trustee may serve as trustee for other debt securities issued by the Company from time to time. DESCRIPTION OF WARRANTS The Company may issue, together with other Debt Securities or separately, Warrants for the purchase of Debt Securities. The Warrants will be issued under Warrant Agreements (each a "Warrant Agreement") to be entered into between the Company and a bank or trust company, as Warrant Agent (the "Warrant Agent"), all as shall be set forth in the Prospectus Supplement or Prospectus Supplements relating to Warrants being offered thereby. A copy of the form of Warrant Agreement, including the form of Warrant Certificate representing the Warrants (the "Warrant Certificates"), is filed as an exhibit to the Registration Statement. The following summaries of certain provisions of the Warrant Agreement and the Warrant Certificates do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Warrant Agreement and the Warrant Certificates, respectively, including the definitions therein of certain terms. GENERAL The Prospectus Supplement or Prospectus Supplements relating to any Warrants will describe the terms of the Warrants offered thereby, the Warrant Agreement relating to such Warrants and the Warrant Certificates representing such Warrants, including the following: (i) the designation, aggregate principal amount and terms of the Debt Securities purchasable upon exercise of such Warrants and the procedures and conditions relating to the exercise of such Warrants; (ii) the designation and terms of any related Debt Securities with which such Warrants are issued and the number of such Warrants issued with each such Debt Security; (iii) the date, if any, on and after which such Warrants and the related Debt Securities will be separately transferable; (iv) the principal amount of Debt Securities purchasable upon exercise of Warrants and the price at which such principal amount of Debt Securities may be purchased upon such exercise; (v) the date on which the right to exercise such Warrants shall commence and the date on which such right shall expire (the "Expiration Date"); (vi) if the Debt Securities purchasable upon exercise of such Warrants are Original Issue Discount Securities, a discussion of federal income tax considerations applicable thereto; and (vii) whether the Warrants represented by the Warrant Certificates will be issued in registered or bearer form, and, if registered, where they may be transferred and registered. Warrant Certificates will be exchangeable for new Warrant Certificates of different denominations and Warrants may be exercised at the corporate trust office of the Warrant Agent or any other office indicated in the applicable Prospectus Supplement. Prior to the exercise of their Warrants, holders of Warrants will not have any of the rights of holders of the Debt Securities purchasable upon such exercise (except to the extent that consent of holders of Warrants may be required for certain modifications of the terms of the Indenture and a Series of Debt Securities issuable upon exercise of the Warrants) and will not be entitled to payments of principal of or interest, if any, on the Debt Securities purchasable upon such exercise. EXERCISE OF WARRANTS Each Warrant will entitle the holder thereof to purchase for cash such principal amount of Debt Securities at such exercise price as shall in each case be set forth in, or be determinable as set forth 12 in, the Prospectus Supplement relating to the Warrants offered thereby. Warrants may be exercised at any time up to the close of business on the Expiration Date set forth in the Prospectus Supplement relating to the Warrants offered thereby. After the close of business on the Expiration Date, unexercised Warrants will become void. Warrants may be exercised as set forth in the Prospectus Supplement relating to the Warrants offered thereby. As soon as practicable after the proper exercise of a Warrant, the Company shall issue, pursuant to the Indenture, the Debt Securities purchased upon such exercise. If less than all of the Warrants represented by such Warrant Certificate are exercised, a new Warrant Certificate will be issued for the remaining amount of Warrants. PLAN OF DISTRIBUTION The Company may sell Debt Securities to or through underwriters and also may sell Debt Securities directly to other purchasers or through agents or dealers, or the Company may sell Debt Securities through a combination of any such methods. The distribution of the Debt Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Underwriters may sell Debt Securities to or through dealers. In connection with sales of Debt Securities, underwriters may receive compensation from the Company or from purchasers of Debt Securities for whom they may act as agents, in the form of discounts, concessions or commissions. Underwriters, dealers and agents that participate in the distribution of Debt Securities may be deemed to be underwriters, and any discounts or commissions received by them and any profit on the resale of Debt Securities by them may be deemed to be underwriting discounts and commissions, under the Act. Any such underwriter or agent will be identified, and any such compensation will be described, in the Prospectus Supplement. Pursuant to agreements which the Company may enter into, underwriters, dealers and agents who participate in the distribution of Debt Securities may be entitled to indemnification by the Company against certain liabilities, including liabilities under the Act. If so indicated in the Prospectus Supplement, the Company will authorize dealers or other persons acting as the Company's agents to solicit offers by certain institutions to purchase Debt Securities from the Company pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by the Company. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of Offered Debt Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The dealers and such other agents will not have any responsibilities in respect of the validity or performance of such contracts. Unless otherwise indicated in the Prospectus Supplement, the Company does not intend to list any of the Debt Securities on a national securities exchange. In the event the Debt Securities are not listed on a national securities exchange, certain broker-dealers may make a market in the Debt Securities, but will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given that any broker-dealer will make a market in the Debt Securities or as to the liquidity of the trading market for the Debt Securities, whether or not the Debt Securities are listed on a national securities exchange. The Prospectus Supplement with respect to the 13 Debt Securities will state, if known, whether or not any broker-dealer intends to make a market in the Debt Securities. If no such determination has been made, the Prospectus Supplement will so state. The place and time of delivery for the Debt Securities in respect of which this Prospectus is delivered are set forth in the Prospectus Supplement. LEGAL OPINIONS Unless otherwise indicated in the Prospectus Supplement, certain legal matters regarding the Offered Debt Securities will be passed upon for the Company by Kirkland & Ellis and for the underwriters by Mayer, Brown & Platt. From time to time, Mayer, Brown & Platt represents the Company in certain matters. EXPERTS The financial statements and schedules incorporated by reference in the Registration Statement have been audited by Ernst & Young LLP and Price Waterhouse LLP, independent auditors, to the extent and for the periods indicated in their reports thereon which are included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. The financial statements and schedule audited by Ernst & Young LLP and Price Waterhouse Auditores Independetes, Brazil have been incorporated herein by reference in reliance on their reports given on their authority as experts in accounting and auditing. 14 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PRO- SPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CRE- ATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COM- PANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ----------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT PAGE ---- The Company............................................................... S-2 Recent Developments....................................................... S-3 Use of Proceeds........................................................... S-5 Capitalization............................................................ S-5 Selected Historical Consolidated Financial Data........................... S-6 Management's Discussion and Analysis of Results of Operations and Financial Condition...................................................... S-7 Business.................................................................. S-15 Description of Debentures................................................. S-19 Underwriting.............................................................. S-21 PROSPECTUS Available Information..................................................... 2 Documents Incorporated by Reference....................................... 2 The Company............................................................... 3 Ratios of Earnings to Fixed Charges....................................... 4 Use of Proceeds........................................................... 4 Description of Debt Securities............................................ 5 Description of Warrants................................................... 12 Plan of Distribution...................................................... 13 Legal Opinions............................................................ 14 Experts................................................................... 14 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $200,000,000 WHIRLPOOL CORPORATION % DEBENTURES DUE , 2016 --------------- LOGO --------------- GOLDMAN, SACHS & CO. SALOMON BROTHERS INC - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------