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<SEC-DOCUMENT>0000950131-02-000774.txt : 20020415
<SEC-HEADER>0000950131-02-000774.hdr.sgml : 20020415
ACCESSION NUMBER: 0000950131-02-000774
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020305
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: WHIRLPOOL CORP /DE/
CENTRAL INDEX KEY: 0000106640
STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD APPLIANCES [3630]
IRS NUMBER: 381490038
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-03932
FILM NUMBER: 02567442
BUSINESS ADDRESS:
STREET 1: WHIRLPOOL CNTR 2000 M 63
STREET 2: C/O CORPORATE SECRETARY
CITY: BENTON HARBOR
STATE: MI
ZIP: 49022-2692
BUSINESS PHONE: 6169235000
MAIL ADDRESS:
STREET 1: WHIRLPOOL CTR 2000 M 63
STREET 2: C/O CORPORATE SECRETARY
CITY: BENTON HARBOR
STATE: MI
ZIP: 49022-2692
FORMER COMPANY:
FORMER CONFORMED NAME: WHIRLPOOL SEEGER CORP
DATE OF NAME CHANGE: 19710824
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d10k405.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 1-3932
-----------------
WHIRLPOOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-1490038
(State of Incorporation) (I.R.S.
EmployerIdentification
No.)
2000 North M-63, Benton 49022-2692
Harbor, Michigan
(Address of principal (Zip Code)
executive offices)
(616) 923-5000
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common stock, par value Chicago Stock Exchange
$1.00 per share and New York Stock
Exchange
Preferred Stock Purchase Chicago Stock Exchange
Rights and New York Stock
Exchange
73/4% Debentures due 2016 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held by
stockholders not including voting stock held by directors and executive
officers of the registrant and certain employee plans of the registrant (the
exclusion of such shares shall not be deemed an admission by the registrant
that any such person is an affiliate of the registrant) on February 25, 2002,
was $4,372,341,382.
On February 25, 2002, the registrant had 66,654,106 shares of common stock
outstanding.
-----------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated herein by reference
into the Part of the Form 10-K indicated:
<TABLE>
<CAPTION>
Part of Form 10-K
into which
Document incorporated
-------- ------------------
<S> <C>
The Company's Annual Report to Stockholders for the year ended December 31, 2001 (the "Annual
Report") Parts I, II and IV
The Company's proxy statement for the 2002 annual meeting of stockholders (SEC File No. 1-3932) (the
"Proxy Statement") Part III
</TABLE>
================================================================================
<PAGE>
PART I
ITEM 1. Business.
General
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 in 13 countries under 11 major brand names and markets products to
distributors and retailers in more than 170 countries. As of December 31, 2001,
the Company had approximately 59,000 employees. As used herein, and except
where the context otherwise requires, the terms "Company" and "Whirlpool"
include Whirlpool Corporation and its consolidated subsidiaries.
Products and Markets
The Company manufactures and markets a full line of major appliances and
related products, primarily for home use. The Company's principal products are
home laundry appliances, home refrigerators and freezers, home cooking
appliances, home dishwashers, room air-conditioning equipment, and mixers and
other small household appliances. Less than 10% of the Company's unit sales
volume is purchased from other manufacturers for resale by the Company. The
Company also produces hermetic compressors and plastic components, primarily
for the home appliance and electronics industries.
The following table sets forth information regarding the total revenue
contributed by each class of similar products which accounted for 10% or more
of the Company's consolidated revenue in 2001, 2000, and 1999:
<TABLE>
<CAPTION>
Percent in
Year ended December 31 (millions of dollars) 2001 2001 2000 1999
- -------------------------------------------- ---------- ------- ------- -------
<S> <C> <C> <C> <C>
Home Refrigerators and Freezers....... 30% $ 3,106 $ 3,165 $ 3,175
Home Laundry Appliances............... 30% $ 3,096 $ 3,094 $ 3,091
Home Cooking Appliances............... 16% $ 1,603 $ 1,636 $ 1,642
Other................................. 24% $ 2,538 $ 2,430 $ 2,603
--- ------- ------- -------
Net Sales.......................... 100% $10,343 $10,325 $10,511
=== ======= ======= =======
</TABLE>
The Company has been the principal supplier of home laundry appliances to
Sears, Roebuck and Co. ("Sears") for over 80 years. The Company is also the
principal supplier to Sears of residential trash compactors and microwave-hood
combinations and a major supplier to Sears of dishwashers, freestanding ranges,
and home refrigerators and freezers. The Company supplies products to Sears for
sale under Sears' Kenmore brand name. Sears has also been a major outlet for
the Company's Whirlpool and KitchenAid brand products since 1989. In 2001,
approximately 21% of the Company's net sales were attributable to sales to
Sears.
In addition to the above, major home appliances are marketed and distributed
in the United States under the Whirlpool, KitchenAid, Roper, and Estate brand
names primarily to retailers, buying groups, and builders. KitchenAid portable
appliances, such as mixers, are sold directly to retailers. The Company sells
products to the builder trade both directly and through distributors.
Additionally, the Company sells to Crosley Corporation under the Crosley
private label brand, and to Costco Wholesale Corporation under the Kirkland
Signature brand. Major home appliances are manufactured and/or distributed in
Canada under the Inglis, Admiral, Speed Queen, Whirlpool, Roper, and KitchenAid
brand names. In Mexico, the Company's affiliate, Vitromatic S.A., manufactures
and markets major home appliances under the Whirlpool, Acros, KitchenAid,
Estate, Roper, and Supermatic brand names. Some products are sold in limited
quantities by the Company to other manufacturers and retailers for resale in
North America under their respective brand names.
2
<PAGE>
In Europe, Whirlpool markets and distributes its major home appliances under
the Whirlpool, Bauknecht, Ignis, Laden, Algor, and other local brand names and
its portable appliances under the KitchenAid brand name. In addition to its
extensive operations in Western Europe, the Company has sales subsidiaries in
Hungary, Poland, the Czech Republic, Slovakia, Greece, Romania, Bulgaria,
Latvia, Estonia, Lithuania, Croatia, and Morocco and representative offices in
Russia, Ukraine, Yugoslavia, and Slovenia. In certain Eastern European
countries, products bearing the Whirlpool and Ignis brand names are sold
through distributors. The Company manufactures refrigerators and freezers and
markets a full line of products under the Whirlpool, KIC, and Ignis brand names
in South Africa. Whirlpool's European operations also sell products carrying
the Whirlpool, Bauknecht, Ignis, Algor, and Fides brand names directly in Asia
and to distributors and dealers in Africa and the Middle East.
In Asia, the Company has organized the manufacture, marketing, and
distribution of its major home appliances into five operating groups: (1)
mainland China; (2) Southeast Asia, which includes India, Bangladesh, Sri
Lanka, and Nepal; (3) Oceania, which includes Australia, New Zealand, and
Pacific Islands; (4) North Asia, which includes Hong Kong, Taiwan, Korea, and
Japan; and (5) Southeast Asia, which includes Thailand, Singapore, Malaysia,
Indonesia, and the Philippines. The Company markets and sells its products in
Asia under the brand names Whirlpool, KitchenAid, Bauknecht, and Ignis by a
combination of direct sales to high-volume retailers and chain stores, and
through full-service distributors to a large network of electronics stores.
In Latin America, the Company markets and distributes its major home
appliances through regional networks under the Whirlpool, Brastemp, Consul, and
Eslabon de Lujo brand names. Appliance sales and distribution in Brazil,
Argentina, and Chile are managed by the Company's Brazilian subsidiary, and in
Bolivia, Peru, Paraguay, and Uruguay through distributors. Appliance sales and
distribution in Central American countries, the Caribbean, Venezuela, Colombia,
and Ecuador are managed by Whirlpool's North America Region and through
distributors.
Competition
The major home appliance business is highly competitive. In most major
markets throughout the world, 2001 was a challenging year in the industry with
rising material costs, decreased consumer demand, and intense price
competition. In North America, there has been continued polarization in retail
distribution channels with most retailers either (1) offering little or no
customer service and competing solely on the basis of price, or (2) providing
value added services coupled with a brand building strategy. The Company firmly
believes that it can best compete in this environment by providing value added
products and services under its strong brand names.
The Company believes that, in terms of units sold, it is the largest North
American manufacturer of home laundry appliances and one of the largest North
American manufacturers of home refrigerators and freezers, room air
conditioning equipment, dishwashers, and cooking products. The Company believes
that in North America there are approximately eight manufacturers of major home
appliances.
The Company believes that in Europe it is, in terms of units sold, one of
the three largest manufacturers and marketers of major home appliance products,
out of approximately 35 European manufacturers, the majority of which
manufacture a limited range of products for a specific geographic region. There
continues to be significant merger and acquisition activity as manufacturers
seek to broaden product lines and expand geographic markets, and the Company
believes that some merger and acquisition activity will continue. The Company
believes that its Pan European organizational structure and strategy of
marketing brand names that are recognized throughout the region are competitive
advantages in the European market.
The Company believes that 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 to meet the specific requirements of consumers in
the region. The Company believes that it is about twice the size of its nearest
competitor and that there are approximately 20 manufacturers of major home
appliances in the region.
3
<PAGE>
In Asia, the major home appliance market is characterized by low saturation
and, as a result, rapid growth (except in Japan and South Korea). The Asian
market is served by approximately 50 manufacturers of varying size and position
on a country-by-country basis. The Company believes that it is the industry
leader in the Indian market and it continues to establish itself throughout the
remainder of the region.
Competition in most of the Company's markets is based upon a wide variety of
factors, including principally product features, price, product quality and
performance, service, warranty, advertising and promotion. As a result of its
global position, the Company believes it has a competitive advantage by reason
of its ability to leverage engineering capabilities across regions, transfer
best practices, and economically purchase raw materials and component parts in
large volumes.
Other Information
The Company's interests outside the United States are subject to risks which
may be greater than or in addition to those risks which are currently present
in the United States. Such risks may include currency exchange rate
fluctuations; high inflation; the need for governmental approval of and
restrictions on certain financial and other corporate transactions and new or
continued business operations; the convertibility of local currencies;
government price controls; restrictions on the remittance of dividends,
interest, royalties, and other payments; 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.
The Company is generally not dependent upon any one source for raw materials
or purchased components essential to its business. In those areas where a
single supplier is used, alternative sources are generally available and can be
developed within the normal manufacturing environment, although some
unanticipated costs may be incurred in transitioning to a new supplier where a
prior single supplier is abruptly terminated. While there are pricing pressures
on some materials and significant demand for certain components, the Company
believes such raw materials and components will be available in adequate
quantities to meet anticipated production schedules.
Patents presently owned by the Company are considered, in the aggregate, to
be important to the conduct of the Company's business. The Company is licensed
under a number of patents, none of which individually is considered material to
its business. The Company is the owner of a number of trademarks and
registrations therefor in the U.S. and foreign countries. The most important
for its North American operations are the trademarks Whirlpool, KitchenAid, the
KitchenAid Mixer Shape, Estate, Roper, Cielo, and Inglis. The most important
trademarks owned by the Company in Europe are Whirlpool, Bauknecht, Ignis, and
Laden. In Latin America, the most important trademarks owned by the Company are
Whirlpool, Brastemp, Consul, and Eslabon de Lujo. The most important trademark
owned by the Company in Asia is Whirlpool.
Expenditures for Company-sponsored research and engineering activities
relating to the development of new products and the improvement of existing
products are included in Note 1 of the Notes to Consolidated Financial
Statements in the Annual Report and are incorporated herein by reference.
The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect or enhance the environment, many of which
require federal, state, or other governmental licenses and permits with regard
to wastewater discharges, air emissions, and hazardous waste management. The
Company's policy is to comply with all such laws and regulations. Where laws
and regulations are less restrictive, the Company has established and is
following its own standards consistent with its commitment to environmental
responsibility.
The Company believes that it is in compliance in all material respects with
all presently applicable federal, state, local, and other governmental
provisions relating to environmental protection in the countries in which it
has manufacturing operations. Capital expenditures and expenses for
manufacturing operations directly
4
<PAGE>
attributable to compliance with such provisions worldwide amounted to
approximately $19 million in 1999, $22 million in 2000, and $23 million in
2001. It is estimated that in 2002 environmental capital expenditures and
expenses for manufacturing operations will be approximately $24 million.
Capital expenditures and expenses for product related environmental activities
were not material in any of the past three years and are not expected to be
material in 2002.
The entire major home appliance industry, including the Company, must
contend with the adoption of stricter governmental energy and environmental
standards to be phased in over the next several years. These include the
general phase-out of ozone depleting chemicals used in refrigeration and energy
standards rulemakings for other selected major appliances produced by the
Company. Compliance with these various standards as they become effective will
require some product redesign. However, the Company believes, based on its
understanding of the current state of proposed regulations, that it should be
able to develop, manufacture, and market products that comply with these
regulations.
The Company has been notified by state and federal environmental protection
agencies of its possible involvement in a number of "Superfund" sites in the
United States. However, the Company does not presently anticipate any material
adverse effect upon the Company's earnings or financial condition arising out
of the resolution of these matters or the resolution of any other known
governmental proceeding regarding environmental protection matters.
For information on product recalls during the past year, see Note 11 of the
Notes to Consolidated Financial Statements in the Annual Report which is
incorporated herein by reference.
For an update of the global restructuring plan announced by the Company in
December 2000, see Note 10 of the Notes to Consolidated Financial Statements in
the Annual Report which is incorporated herein by reference.
For certain other financial information concerning the Company's business
segments and foreign and domestic operations, see Notes 1 and 15 of the Notes
to Consolidated Financial Statements in the Annual Report which are
incorporated herein by reference.
ITEM 2. Properties.
The principal executive offices of Whirlpool Corporation are located in
Benton Harbor, Michigan. At December 31, 2001, the principal manufacturing
operations of the Company were carried on at 44 locations worldwide, 34 of
which are located in 12 countries outside the United States. The Company
occupied a total of approximately 41.6 million square feet devoted to
manufacturing, service, administrative offices, warehouse, distribution, and
sales space. Over 12.9 million square feet of such space is occupied under
lease. In general, all facilities are well maintained, suitably equipped, and
in good operating condition.
ITEM 3. Legal Proceedings.
As of, and during the quarter ended, December 31, 2001, there were no
material pending legal proceedings to which the Company or any of its
subsidiaries was a party or to which any of their property was subject.
ITEM 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders in the fourth
quarter of 2001.
5
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock is traded on the New York Stock Exchange and the
Chicago Stock Exchange. As of February 25, 2002, the number of holders of
record of the Company's common stock was approximately 8,720.
High and low sales prices (as reported on the New York Stock Exchange
composite tape) for the Company's common stock for each quarter during the
years 2000 and 2001 are set forth under the heading "Stockholders' and Other
Information" on the last page of the Annual Report and are incorporated herein
by reference. Cash dividends declared for the Company's common stock for each
quarter during the years 2000 and 2001 are set forth in Note 16 of the Notes to
Consolidated Financial Statements in the Annual Report and are incorporated
herein by reference.
ITEM 6. Selected Financial Data.
The selected financial data for the five years ended December 31, 2001 with
respect to the following line items are shown under the "Eleven Year
Consolidated Statistical Review" in the Annual Report and incorporated herein
by reference: Total revenues, earnings from continuing operations, earnings
from continuing operations per share of common stock, dividends declared per
share of common stock, total assets, and long-term debt. See the material
incorporated herein by reference in response to Item 7 of this report for a
discussion of the effects on such data of business combinations and other
acquisitions, disposition and restructuring activity, restructuring costs,
accounting changes, earnings of foreign affiliates, and other significant
activity impacting or affecting the comparability of reported amounts.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
See the "Management's Discussion and Analysis" section of the Annual Report
which is incorporated herein by reference.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
Information with respect to market risk can be found under the caption
"Market Risk" in the "Management's Discussion and Analysis" section of the
Annual Report and is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements of the Company are contained in the
Annual Report and are incorporated herein by reference. Supplementary financial
information regarding quarterly results of operations (unaudited) for the years
ended December 31, 2000 and 2001 is set forth in Note 16 of the Notes to
Consolidated Financial Statements. For a list of financial statements and
schedules filed as part of this report, see the "Index to Financial Statements
and Financial Statement Schedule(s)" beginning on page F-1.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
6
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The following table sets forth the names of the Company's executive officers
at December 31, 2001, the positions and offices with the Company held by them
at such date, the year they first became executive officers, and their ages at
December 31, 2001:
<TABLE>
<CAPTION>
First Became
an Executive
Name Office Officer Age
---- ------ ------- ---
<C> <S> <C> <C>
David R. Whitwam Director, Chairman of the Board and Chief Executive Officer 1985 59
Jeff M. Fettig Director, President and Chief Operating Officer 1994 44
Mark E. Brown Executive Vice President and Chief Financial Officer 1999 50
Paulo F. M. Periquito Executive Vice President and President, Latin America 1997 55
David L. Swift Executive Vice President, North American Region 2001 43
Michael D. Thieneman Executive Vice President and Chief Technology Officer 1997 53
Michael A. Todman Executive Vice President and President, Whirlpool Europe 2001 44
</TABLE>
Each of the executive officers named above was elected to serve in the
office indicated until the first meeting of the Board of Directors following
the annual meeting of stockholders in 2002 and until his successor is chosen
and qualified or until his earlier resignation or removal. Each of the
executive officers of the Company has held the position set forth in the table
above or has served the Company in various executive or administrative
capacities for at least the past five years, except for Mr. Swift who, prior to
joining the Company in October 2001, for the previous 20 years held various
executive or administrative positions with the Eastman Kodak Company, the most
recent being President, Kodak Professional Group.
Information with respect to directors of the Company can be found under the
caption "Directors and Nominees for Election as Directors" in the Company's
Proxy Statement and is incorporated herein by reference.
ITEM 11. Executive Compensation.
Information with respect to compensation of executive officers and directors
of the Company can be found under the captions "Executive Compensation" and
"Compensation of Directors" in the Proxy Statement and is incorporated herein
by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
Information with respect to security ownership by the only person(s) known
to the Company to beneficially own more than 5% of the Company's stock and by
each director of the Company and all directors and elected officers of the
Company as a group can be found under the caption "Security Ownership" in the
Proxy Statement and is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
None.
7
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
1. The financial statements listed in the "Index to Financial Statements
and Financial Statement Schedule."
2. The financial statement schedule listed in the "Index to Financial
Statements and Financial Statement Schedule."
3. The exhibits listed in the "Exhibit Index."
(b) Reports on Form 8-K filed during the fourth quarter of 2001.
1. A Current Report on Form 8-K for October 16, 2001 pursuant to Item
5--"Other Events" announced the Company's third quarter 2001 earnings, and
also a voluntary recall of approximately 1.8 million microwave-hood
combinations.
2. A Current Report on Form 8-K for October 19, 2001 pursuant to Item
5--"Other Events" announced the mailing of a summary of the 2000 annual
report for the Whirlpool 401(k) Plan to members of the Plan.
3. A Current Report on Form 8-K for November 26, 2001 pursuant to Item
5--"Other Events" announced the hiring of David L. Swift as Executive Vice
President, and a change of positions of Executive Vice President Michael A.
Todman.
(c) Exhibits.
See attached "Exhibit Index."
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate
section of this report.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
WHIRLPOOL CORPORATION
(Registrant)
By: /s/ MARK E. BROWN
-----------------------------
Mark E. Brown
(Principal Financial Officer)
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
DAVID R. WHITWAM* Director, Chairman of the )
- ----------------------------- Board and Chief Executive )
David R. Whitwam Officer (Principal )
Executive Officer) )
)
JEFF M. FETTIG* Director, President and Chief )
- ----------------------------- Operating Officer )
Jeff M. Fettig (Principal Operating Officer) )
)
MARK E. BROWN* Executive Vice President and )
- ----------------------------- Chief Financial Officer )
Mark E. Brown (Principal Financial Officer) )
)
BETTY A. BEATY* Vice President and Controller )
- ----------------------------- (Principal Accounting )
Betty A. Beaty Officer) )
)
HERMAN CAIN* Director ) March 1, 2002
- ----------------------------- )
Herman Cain )
)
GARY T. DICAMILLO* Director )
- ----------------------------- )
Gary T. DiCamillo )
)
ALLAN D. GILMOUR* Director )
- ----------------------------- )
Allan D. Gilmour )
)
KATHLEEN J. HEMPEL* Director )
- ----------------------------- )
Kathleen J. Hempel )
)
JAMES M. KILTS* Director )
- ----------------------------- )
James M. Kilts )
)
ARNOLD G. LANGBO* Director )
- ----------------------------- )
Arnold G. Langbo )
)
PHILIP L. SMITH* Director )
- ----------------------------- )
Philip L. Smith )
)
JANICE D. STONEY* Director )
- ----------------------------- )
Janice D. Stoney
/s/ DANIEL F. HOPP Attorney-in-Fact
*By: ______________________
Daniel F. Hopp
9
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEMS 14(a) (1) AND (2) AND 14(d)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 2001
WHIRLPOOL CORPORATION AND CONSOLIDATED SUBSIDIARIES
The following consolidated financial statements of the registrant and its
consolidated subsidiaries, set forth in the Annual Report, are incorporated
herein by reference in Item 8:
Consolidated balance sheets--December 31, 2001 and 2000
Consolidated statements of earnings--Three years ended December 31, 2001
Consolidated statements of changes in stockholders' equity--Three years ended
December 31, 2001
Consolidated statements of cash flows--Three years ended December 31, 2001
Notes to consolidated financial statements
The following reports of independent auditors and consolidated financial
statement schedules of the registrant and its consolidated subsidiaries are
submitted herewith in response to Items 14(a) (2) and 14(d):
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors F-2
Schedule II--Valuation and qualifying accounts... F-3
The following exhibits are included herein:
Exhibit 12--Ratio of Earnings to Fixed Charges. F-4
</TABLE>
Individual financial statements of the registrant's affiliated foreign
companies, accounted for by the equity method, have been omitted since no such
company individually constitutes a significant subsidiary.
Certain schedules for which provisions are made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
THE STOCKHOLDERS AND BOARD OF DIRECTORS
WHIRLPOOL CORPORATION
BENTON HARBOR, MICHIGAN
We have audited the accompanying consolidated balance sheets of Whirlpool
Corporation as of December 31, 2001 and 2000, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2001. Our audits also included the
financial statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Whirlpool Corporation as of December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 2001 the
Company changed its method of accounting for derivative instruments and hedging
activities.
Chicago, Illinois
February 4, 2002
F-2
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
WHIRLPOOL CORPORATION AND SUBSIDIARIES
Years Ended December 31, 2001, 2000, and 1999
(millions of dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------ -------------------- --------------------------------- -------------------- --------------
Additions
---------------------------------
(1) (2)
Balance at Beginning Charged to Costs Charged to Other Balance at End
Description of Period and Expenses Accounts /Other Deductions--Describe of Period
----------- -------------------- ---------------- ---------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 2001:
Allowances for doubtful
accounts--trade receivables......... $103 $ 32 $42--A $ 93
==== ==== === ====
Allowances for doubtful
accounts--financing
receivables and leases.............. $ 5 $ 0 $ 5--B $ 0
==== ==== === ====
Accrued expenses--
restructuring costs................. $ 5 $150 $78--C $ 77
==== ==== === ====
Accrued expenses--
product recall costs................ $ 0 $295 $56--D $239
==== ==== === ====
Year Ended December 31, 2000:
Allowances for doubtful accounts--
trade receivables................... $124 $ 13 $34--A $103
==== ==== === ====
Allowances for doubtful accounts--
financing receivables and leases.... $ 5 $ 0 $ 0 $ 5
==== ==== === ====
Accrued expenses--restructuring
costs............................... $ 39 $ -- $34--C $ 5
==== ==== === ====
Year Ended December 31, 1999:
Allowances for doubtful accounts--
trade receivables................... $116 $ 30 $22--A $124
==== ==== === ====
Allowances for doubtful accounts--
financing receivables and leases.... $ 71 $ 0 $66--E $ 5
==== ==== === ====
Accrued expenses--restructuring
costs............................... $117 $ -- $78--C $ 39
==== ==== === ====
</TABLE>
- --------
Note A--The amounts represent accounts charged off, less recoveries of $2 in
2001, $4 in 2000 and $2 in 1999, translation adjustments and transfers.
Note B--The amount represents accounts charged off.
Note C--Includes cash payments for employee termination costs and non-employee
exit costs such as lease terminations.
Note D--Represents cash costs paid associated with the development and
implementation of the microwave-hood combination product recall.
Note E--The amount for 1999 represents accounts charged off, less recoveries of
$1.
F-3
<PAGE>
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
------------
2001 2000
---- ----
<S> <C> <C>
Pretax earnings........................................... $ 93 $577
Portion of rents representative of the interest factor.... 25 23
Interest on indebtedness.................................. 162 181
Amortization of debt expense and premium.................. 1 1
WFC preferred stock dividend.............................. 4 4
---- ----
Adjusted income...........................................
$285 $786
==== ====
Fixed charges
Portion of rents representative of the interest factor. $ 25 $ 23
Interest on indebtedness............................... 162 181
Amortization of debt expense and premium............... 1 1
WFC preferred stock dividend........................... 4 4
---- ----
$192 $209
==== ====
Ratio of earnings to fixed charges........................ 1.5 3.8
==== ====
</TABLE>
F-4
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEMS 14(a)(3) and 14(c)
EXHIBIT INDEX
YEAR ENDED DECEMBER 31, 2001
The following exhibits are submitted herewith or incorporated herein by
reference in response to Items 14(a)(3) and 14(c). Each exhibit that is
considered a management contract or compensatory plan or arrangement required
to be filed pursuant to Item 14(a)(3) of Form 10-K is identified by a "(Z)."
<TABLE>
<CAPTION>
Number and Description of Exhibit
- ---------------------------------
<C> <S>
3(i) Restated Certificate of Incorporation of the Company. [Incorporated by reference from Exhibit 3(i)
to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993]
[File No. 1-3932]
3(ii) Amended and Restated By-laws of the Company as amended August 17, 1999. [Incorporated by
reference from Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999] [File No. 1-3932]
4(i) The registrant hereby agrees to furnish to the Securities and Exchange Commission, upon request,
the instruments defining the rights of holders of each issue of long-term debt of the registrant and
its subsidiaries.
4(ii) Rights Agreement, dated April 21, 1998, between Whirlpool Corporation and First Chicago Trust
Company of New York, with exhibits. [Incorporated by reference from Exhibit 4 to the
Company's Form 8-K, dated April 22, 1998] [File No. 1-3932]
10(iii)(a) Whirlpool Retirement Benefits Restoration Plan (as amended January 1, 1992).(Z) [Incorporated by
reference from Exhibit 10(iii)(a) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993] [File No. 1-3932]
10(iii)(b) Whirlpool Supplemental Executive Retirement Plan (as amended and restated effective
December 31, 1993).(Z) [Incorporated by reference from Exhibit 10(iii)(c) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993] [File No. 1-3932]
10(iii)(c) Resolution adopted on December 12, 1989 by the Board of Directors of the Company adopting a
compensation schedule, life insurance program and retirement benefit program for eligible
Directors.(Z) [Incorporated by reference from Exhibit 10(iii)(d) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993] [File No.1-3932]
10(iii)(d) Resolution adopted on December 8, 1992 by the Board of Directors of the Company adopting a
Flexible Compensation Program for the Corporation's nonemployee directors.(Z) [Incorporated
by reference from Exhibit 10(iii)(e) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993] [File No. 1-3932]
10(iii)(e) Whirlpool Corporation Deferred Compensation Plan for Directors (as amended effective January 1,
1992 and April 20, 1993).(Z) [Incorporated by reference from Exhibit 10(iii)(f) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993] [File No. 1-3932]
10(iii)(f) Form of Agreement providing for severance benefits for certain executive officers.(Z) [Incorporated
by reference from Item 5--Other Events to the Company's Form 8-K dated April 26, 2000] [File
No. 1-3932]
10(iii)(g) Whirlpool Corporation 1989 Omnibus Stock and Incentive Plan (as amended June 20, 1995).(Z)
[Incorporated by reference from Exhibit 10(iii)(r) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995] [File No. 1-3932]
10(iii)(h) Administrative Guidelines for the Whirlpool Corporation Restricted Stock Value Program (pursuant
to one or more of Whirlpool's Omnibus Stock and Incentive Plans).(Z) [Incorporated by reference
from Exhibit 10(iii)(i) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993] [File 1-3932]
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Number and Description of Exhibit
- ---------------------------------
<C> <S>
10(iii)(i) Administrative Guidelines for the Whirlpool Corporation Executive Stock Appreciation and
Performance Program (pursuant to one or more of Whirlpool's Omnibus Stock and Incentive
Plans).(Z) [Incorporated by reference from Exhibit 10(iii)(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993] [File No. 1-3932]
10(iii)(j) Whirlpool Corporation Nonemployee Director Stock Ownership Plan (as amended February 16,
1999, effective April 20, 1999). (Z) [Incorporated by reference from Exhibit A to the Company's
proxy statement for the 1999 annual meeting of stockholders] [File No. 1-3932]
10(iii)(k) Whirlpool Performance Excellence Plan (as amended January 1, 1992, February 15, 1994 and
April 20, 1999).(Z) [Incorporated by reference from Exhibit B to the Company's proxy statement
for the 1999 annual meeting of stockholders] [File No. 1-3932]
10(iii)(l) Whirlpool Corporation Executive Deferred Savings Plan (as amended effective January 1, 1992).(Z)
[Incorporated by reference from Exhibit 10(iii)(n) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993] [File No. 1-3932]
10(iii)(m) Whirlpool Corporation Executive Officer Bonus Plan (effective as of January 1, 1994).(Z)
[Incorporated by reference from Exhibit 10(iii)(o) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994] [File No. 1-3932]
10(iii)(n) Whirlpool Corporation Charitable Award Contribution and Additional Life Insurance Plan for
Directors (effective April 20, 1993).(Z) [Incorporated by reference from Exhibit 10(iii)(p) to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994] [File No.
1-3932]
10(iii)(o) Form of agreement for the Whirlpool Corporation Career Stock Grant Program (pursuant to one or
more of Whirlpool's Omnibus Stock and Incentive Plans).(Z) [Incorporated by reference from
Exhibit 10(iii)(q) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995] [File No. 1-3932]
10(iii)(p) Whirlpool Corporation 1996 Omnibus Stock and Incentive Plan (as amended, effective February 16,
1999).(Z) [Incorporated by reference from Exhibit 10(iii)(r) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999] [File No. 1-3932]
10(iii)(q) Whirlpool Corporation 1998 Omnibus Stock and Incentive Plan (as amended, effective February 16,
1999).(Z) [Incorporated by reference from Exhibit 10(iii)(s) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999] [File No. 1-3932]
10(iii)(r) Employment Agreement with Paulo F.M.O. Periquito.(Z) [Incorporated by reference from Part II
Other Information, Item 6 to the Company's Form 10-Q for the period ended March 31, 1998]
[File No. 1-3932]
10(iii)(s) Whirlpool Corporation 2000 Omnibus Stock and Incentive Plan.(Z) [Incorporated by reference from
Exhibit A to the Company's proxy statement for the 2000 annual meeting of stockholders] [File
No. 1-3932]
10(iii)(t) Form of Stock Option Grant Document for the Whirlpool Corporation Stock Option Program
(pursuant to one or more of Whirlpool's Omnibus Stock and Incentive Plans).(Z) [Incorporated by
reference from Exhibit 10(iii)(t) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000] [File No. 1-3932]
10(iii)(u) Whirlpool Corporation Key Employee Treasury Stock Ownership Plan (effective October 16,
2001).(Z)
10(iii)(v) Whirlpool Corporation Nonemployee Director Treasury Stock Ownership Plan (effective
October 16, 2001).(Z) [Incorporated by reference from Exhibit 4(d) to the Company's
Registration Statement on Form S-8 filed on November 20, 2001] [File No. 333-73726]
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
Number and Description of Exhibit
- ---------------------------------
<C> <S>
10(iii)(w) Administrative Guidelines for the Whirlpool Corporation Special Retention Program (pursuant to
one or more of Whirlpool's Omnibus Stock and Incentive Plans).(Z)
12 Statement Re: Computation of the Ratios of Earnings to Fixed Charges
13 Annual Report to Stockholders for the year ended December 31, 2001
21 List of Subsidiaries
23 Consent of Ernst & Young LLP
24 Power of Attorney
</TABLE>
E-3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(III)U
<SEQUENCE>3
<FILENAME>dex10iiiu.txt
<DESCRIPTION>KEY EMPLOYEE TREASURY STOCK OWNERSHIP PLAN
<TEXT>
<PAGE>
WHIRLPOOL CORPORATION
KEY EMPLOYEE TREASURY STOCK OWNERSHIP PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE
Whirlpool Corporation, a Delaware corporation (the "Corporation"), hereby adopts
this Key Employee Treasury Stock Ownership Plan (the "Plan"). The purpose of the
Plan is to foster and promote the long-term financial success of the Corporation
by attracting and retaining outstanding employees by enabling them to
participate in the Corporation's growth by providing for discretionary awards of
stock-based forms of compensation to be paid in common stock, $1.00 par value
per share ("Common Stock"), from the Corporation's treasury.
1.2 ADMINISTRATION
The Plan shall be administered by the Human Resources Committee of the Board of
Directors of the Corporation (the "Committee").
1.3 PARTICIPATION
Awards under the Plan shall only be granted to officers and other key employees
of the Corporation. When selecting participants to receive Awards and the form
and amount of Awards, the Committee may consider the employee's job function and
responsibilities; the employee's past, present, and potential future
contributions to the Corporation; and other factors deemed relevant by the
Committee. Grants may be made to the same individual on more than one occasion.
1.4 SHARES SUBJECT TO THE PLAN
All Awards granted under the Plan shall be paid in treasury shares of the
Corporation's Common Stock. The maximum number of shares of Common Stock that
may be awarded for all purposes under the Plan shall be 200,000 (subject to
adjustment pursuant to Section 3.1).
1.5 GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine gender
when used in the Plan shall include the feminine gender, the singular shall
include the plural, and the plural shall include the singular.
1
<PAGE>
ARTICLE II
AWARDS UNDER THE PLAN
2.1 TYPES OF AWARDS UNDER THE PLAN
Awards under the Plan may be in the form of any one or more of the following:
Non-qualified Stock Options, Stock Appreciation Rights, Performance Units,
Performance Shares, Restricted Stock, Restricted Stock Equivalents, Unrestricted
Stock Grants, as well as grants of any other stock-based form of compensation
within the discretion of the Committee (collectively, the "Awards"). All Awards
granted under the Plan shall be paid in treasury shares of the Corporation's
Common Stock.
2.2 TERMS AND CONDITIONS OF AWARDS
The Committee will establish the terms and conditions of each Award as it deems
appropriate at the time of each grant.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1 ADJUSTMENT UPON CERTAIN CHANGES
In the event of a stock dividend or stock split, or combination or other
reduction in the number of issued shares of Common Stock, a merger,
consolidation, reorganization, recapitalization, sale or exchange of
substantially all assets, or dissolution of the Corporation, the Board of
Directors shall, in order to prevent the dilution or enlargement of rights under
this Plan, make such adjustments in the number and type of shares of Common
Stock authorized by the Plan. In the event fractional shares of Common Stock
would otherwise result from any such adjustment, the number of shares of Common
Stock so authorized and covered and the prices thereof shall be further adjusted
so as to eliminate such fractions.
3.2 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board of Directors may suspend or terminate the Plan or any portion thereof
at any time and may amend it from time to time in such respects as the Board of
Directors may deem advisable in order that any Awards thereunder shall conform
to or otherwise reflect any change in applicable laws or regulations, or to
permit the Corporation or the Directors to enjoy the benefits of any change in
applicable laws or regulations, or in any other respect the Board of Directors
may deem to be in the best interests of the Corporation. No such amendment,
suspension, or termination shall impair rights under any outstanding Awards
without the consent of the individual affected thereby.
2
<PAGE>
3.3 LISTING, REGISTRATION AND LEGAL COMPLIANCE
Each award of Common Stock shall be subject to the requirement that if at any
time counsel to the Corporation shall determine that the listing, registration,
or qualification thereof or of any shares of Common Stock or other property
subject thereto upon any securities exchange or under any foreign, federal, or
state securities or other law or regulation, or the consent or approval of any
governmental body or the taking of any other action to comply with or otherwise
with respect to any such law or regulation, is necessary or desirable as a
condition to or in connection with the award of such Common Stock or other
property thereunder, no such award may be paid in Common Stock unless such
listing, registration, qualification, consent, approval, or other action shall
have been effected or obtained free of any conditions not acceptable to the
Corporation. The Corporation may at any time impose any limitations upon the
terms of any award under this Plan that, in the opinion of the Board of
Directors, are necessary or desirable in order to cause the Plan or any other
plan of the Corporation to comply with Rule 16b-3 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
3.4 RIGHTS OF PARTICIPANTS
Nothing in the Plan shall interfere with or limit in any way the right of the
Corporation to terminate any employee's employment at any time, nor confer upon
any employee any right to continue in the employ of the Corporation or a
Subsidiary for any period of time or to continue the employee's present or any
other rate of compensation. No employee shall have a right to be selected to
receive Awards under the Plan, or, having been so selected, to be selected
again.
3.5 REQUIREMENTS OF LAW; GOVERNING LAW
The issuance of shares of Common Stock shall be subject to all applicable laws,
rules, and regulations and to such approvals by any governmental agencies or
national securities exchanges as may be required. The Plan shall be construed in
accordance with and governed by the laws of the State of Delaware. The
provisions of the Plan shall be interpreted so as to comply with the conditions
or requirements of Rule 16b-3 of the Exchange Act, unless applicable law
otherwise requires a contrary interpretation of any such provision.
3.6 TERM OF PLAN
Awards shall be made hereunder until this Plan is terminated by action of the
Corporation's Board of Directors.
October 16, 2001
/ / / / /
- --------------------------------------------------------------------------------
3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(III)W
<SEQUENCE>4
<FILENAME>dex10iiiw.txt
<DESCRIPTION>ADMINISTRATIVE GUIDELINES-SPECIAL RETENTION PROG.
<TEXT>
<PAGE>
SPECIAL RETENTION PROGRAM
Administrative Guidelines
Under the Omnibus Stock and Incentive Plan
Purpose
- -------
The Special Retention Program (SRP) allows for an equity grant, which is
designed to assist with the retention and motivation of key employees, in the
face of a highly competitive market for top talent. This program combines the
use of phantom restricted stock and payments in lieu of dividends (dividend
equivalents) to improve the retention value of Whirlpool's compensation
programs. Further, it provides an additional capital accumulation opportunity to
help retain a select group of high caliber, career minded key employees.
The phantom restricted stock is granted under the Company's Omnibus Stock and
Incentive Plans, and is governed by the terms and conditions of those plans.
The dividend equivalent awards are governed by the terms and conditions of the
Dividend Equivalent Plan document, and are paid out of the Company's general
funds or the Company's stock (treasury or newly issued).
Eligibility
- -----------
Participation in the program will be limited to thirty-five to fifty officers of
the Corporation. Participants are recommended by the Office of the Chairman and
are approved by the Human Resources Committee of the Board of Directors.
Program Guidelines and Award Payments
- -------------------------------------
Phantom Restricted Shares
Phantom restricted shares are awarded to participants by their classification
within tiers. Each tier has an approximate salary value as follows:
Tier I ----- equals approximately four (4) times salary
Tier II ---- equals approximately three (3) times salary
Tier III --- equals approximately two (2) times salary
The Office of the Chairman initially determines the participants for each tier.
To arrive at the number of shares to be awarded, the approximate salary value is
divided by the share price (FMV) of the stock as of the day of the Human
Resource Committee meeting ($54.07).
Once granted, the phantom restricted shares will vest over a seven-year period.
The restrictions on the first 50% of the stock will lapse after the completion
of the third year, and the remaining 50% will lapse after the completion of the
seventh year of the program. As the restrictions lapse, the participants will
receive outright ownership of those shares.
1
<PAGE>
Dividend Equivalents
Dividend equivalents may be paid on deferred phantom restricted shares until
either retirement or termination from the Company, at which time they will be
distributed to the participant.
Deferrals
- ---------
Once the restrictions on the phantom restricted shares have lapsed, they may be
deferred. These deferred shares will continue to maintain the characteristic of
stock, and as such, will accumulate dividend equivalents similar to any other
shares of Whirlpool stock. When retirement, or other termination from the
Company occurs, these deferred phantom shares and dividend equivalents will be
paid out at first distribution. All payments will be made as soon as
administratively feasible.
Tax Withholding
- ---------------
As with any other payment; the company has the obligation to withhold the
appropriate income taxes, FICA, or other social charges as required by the
governing tax jurisdiction. This withholding will be in the form of cash for
cash payments and in the form of shares for stock payments. For U.S.
participants, the federal supplemental tax rate (currently 28%) and the state
supplemental tax rate (if applicable) will be withheld. This will apply to
either cash or shares received.
Termination of Employment or Other Status Changes
- -------------------------------------------------
In the case of death, retirement under the provisions of the applicable
Whirlpool (or subsidiary) pension plan, termination due to disability or
termination for any other reason; those phantom restricted shares whose
restrictions have not lapsed will be forfeited.
Non U.S. Participants
- ---------------------
In some jurisdictions, it may be necessary to use other vehicles in lieu of
phantom restricted shares. In those cases a similar vehicle may be granted in a
like amount. For example, performance units or other cash equivalents may be
used.
Beneficiary Designation
- -----------------------
In the event of a participant's death, any benefits under the program will be
paid to the beneficiary named under the Omnibus Stock and Incentive plans in
accordance with the provisions of the grant document.
Change in Control
- -----------------
If there is a change in control of Whirlpool Corporation, as defined in the
Company's Employee Pension Plan, all restrictions on the phantom restricted
shares will lapse and unrestricted shares will be delivered to the program
participants, provided they are Company employees, on the date that the change
of control occurs.
Administration
- --------------
Corporate Compensation will be responsible for the overall administration of the
program.
2
<PAGE>
They will maintain the record keeping for the eligible employees, including
participant's names, vesting schedules, dividend equivalent accumulations (where
applicable), changes in status and other relevant information as required. They
will also be responsible for determining the payments of stock, and accrued
dividends (if applicable).
The Corporate Legal department will be responsible for the issuance of any stock
payments under the phantom restricted share awards or deferral provisions of
this program. They will also maintain the appropriate record keeping.
Effective Date of the Program and Other Provisions
- --------------------------------------------------
This program was approved by the Human Resources Committee of the Board of
Directors who retain the right to amend, modify or cancel its' provisions as
they deem appropriate. The program will be administered by the Corporate
Vice-President of Human Resources or his designated representative, and is
effective February 19, 2001.
Final Note
- ----------
These administrative guidelines provide for the fair and equitable
administration of the program on a year-to-year basis. These guidelines are
intended to clarify and supplement the provisions of the Corporation's Omnibus
Stock and Incentive Plans, which govern this program. Any statements contained
in this document that contradict the provisions of the Omnibus Plan document
will be considered inoperative, and the language in the relevant Omnibus Plan
document will control.
3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>5
<FILENAME>dex12.txt
<DESCRIPTION>STATEMENT RE: COMPUTATION OF RATIOS
<TEXT>
<PAGE>
EXHIBIT 12 - RATIO OF EARNINGS TO FIXED CHARGES
WHIRLPOOL CORPORATION AND SUBSIDIARIES
December 31,
------------------------------------
2001 2000
-------------- --------------
Pretax earnings $ 93 $ 577
Portion of rents representative
of the interest factor 25 23
Interest on indebtedness 162 181
Amortization of debt expense
and premium 1 1
WFC preferred stock dividend 4 4
------------- --------------
Adjusted income $ 285 $ 786
============= ==============
Fixed charges
- -------------
Portion of rents representative
of the interest factor $ 25 $ 23
Interest on indebtedness 162 181
Amortization of debt expense
and premium 1 1
WFC preferred stock dividend 4 4
------------- --------------
$ 192 $ 209
============= ==============
Ratio of earnings to
fixed charges 1.5 3.8
============= ==============
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>dex13.txt
<DESCRIPTION>ANNUAL REPORT TO STOCKHOLDERS
<TEXT>
<PAGE>
Intro Copy
Think, listen, create. Every day, consumers around the world are discovering the
power of Whirlpool innovation. In 2001, we introduced a record number of
thoughtful solutions that make time at home a little easier and more enjoyable.
Company Overview
Whirlpool Corporation is the world's leading manufacturer and marketer of major
home appliances. The company manufactures in 13 countries and markets products
in more than 170 countries under major brand names such as Whirlpool,
KitchenAid, Roper, Estate, Bauknecht, Ignis, Laden, Inglis, Brastemp and Consul.
Whirlpool is also the principal supplier to Sears, Roebuck and Co. of many major
home appliances marketed under the Kenmore brand name.
Chairman's Letter
Last year, our company celebrated its 90th anniversary by introducing a record
number of innovative, branded products and solutions to our customers worldwide,
which enabled us to deliver a record year of operating performance.
2001 in review
Entering the year, we faced difficult economic circumstances and weakening
markets around the world. In December 2000, we announced a $300 million to $350
million restructuring effort to improve the competitive position of our global
operations, given the new realities within these markets. Despite an outlook for
challenging conditions early in 2001, we forecasted economic turnarounds and
improved industry appliance shipments for North America and Europe in the second
half.
Looking back, 2001 turned out to be far different than the year we expected for
Whirlpool, the nation and the world. In Latin America, Argentina's destabilizing
currency crisis and Brazil's energy shortages severely hampered the region's
economies and dampened growth. Expectations for a second-half improvement in
Europe's economic fortunes faded with recession in Germany. And in North
America, a mild economic recession arrived, almost unnoticed, amid the collapse
of the technology markets. Earlier projections of sequential improvements in
U.S. gross domestic product (GDP) failed to materialize.
The tragic events of September 11 in the United States left the country reeling
and moved the economy deeper into recession. Subsequent military action in South
Asia and rising tensions in the region affected the economy of India -- one of
Whirlpool's key growth markets.
From an industry perspective, we saw a rash of competitor consolidations. Maytag
acquired Amana Appliances in August. In December, Merloni Elettrodomestici of
Italy acquired from Merconi plc its 50-percent stake in General Domestic
Appliances -- a major supplier of appliances in the United Kingdom. And in
January 2002, Elco Holdings Inc. purchased the assets of Brandt, a major home
appliance manufacturer in France.
<PAGE>
The global economic and political events of 2001 tested the people of Whirlpool
during one of the most challenging periods in the company's history. Through it
all, our organization remained focused on the tasks of strengthening our brands
and building unmatched levels of customer loyalty. By leveraging Whirlpool's
global structure, by differentiating the company's global brands from
competitors, and by connecting Whirlpool people and processes worldwide, we were
able to strengthen our position as the world's leading manufacturer of major
home appliances.
Earnings reconciliation
Full-Year 2001
--------------------
Earnings
in millions EPS
- -------------------------------------------------------------------------------
Core earnings from operations $ 371 5.45
Restructuring and related charges (156) (2.29)
Product recall charges (181) (2.66)
- -------------------------------------------------------------------------------
Earnings from continuing operations $ 34 0.50
- -------------------------------------------------------------------------------
Discontinued operations (21) (0.31)
Change in accounting principle* 8 0.12
- -------------------------------------------------------------------------------
Net earnings (GAAP) $ 21 0.31
===============================================================================
* SFAS No. 133
2001 results of operations
We believe it's important that our shareholders understand the company's
underlying, or core, operating strengths and trends, as well as the impact of
various special charges that affect our net earnings under generally accepted
accounting principles (GAAP). For both transparency and clarity, we follow the
practice of reconciling and presenting the company's core earnings -- which
exclude certain one-time charges and gains -- and net earnings, as shown in the
above table.
Our continuing operations delivered full-year core earnings of $5.45 per diluted
share, an increase of nearly 5 percent from 2000. In 2001, full-year net
earnings were $0.31 per diluted share.
Full-year net sales of $10.3 billion were level with 2000, reflecting the
effects of currency translations during the year. Absent currency translations,
net sales increased 3 percent.
Full-year free cash flow of $533 million was a record for the company. The cash
allowed us to aggressively fund the company's execution of its strategies during
the year and pay down debt by more than $500 million.
Whirlpool's 2001 operating performance underscored the strength of the company's
capabilities and success of its strategies in creating value in challenging
economic conditions.
Strategy Leads Performance
For years, almost all appliance industry participants were executing similar
strategies that focused on lowering the cost and improving the quality of
products, while expanding distribution and increasing the competitive share of
display space on the retail floor.
Whirlpool has been executing a dramatically different strategy. Instead of
focusing on competitors, we have been listening to our customers and building
loyalty through the introduction of relevant and innovative solutions -- new
ideas geared to the needs of consumer lifestyles. Our people are focusing their
attention on innovations that deliver real value to both consumers and
shareholders -- while making it difficult for competitors to copy. And our
global organization is providing the resources and processes to help create
innovation never before seen in either our company or our industry. A record
number of these products were introduced in 2001, and they are paying dividends
in terms of growth and market share, as well as higher prices and margins across
the business.
As Whirlpool continues on this course, we ultimately want to create unmatched
loyalty for our brands by building a lifetime relationship with our customers.
To accomplish this, we will continue to introduce clearly differentiated
products, services and solutions that customers will want long after their
initial purchase experience with the brand.
<PAGE>
Global Platform Capabilities
Aligning our global resources, brands and business processes to support this
strategy has been an ongoing effort. Whirlpool has a unique global business
platform and structure from which to grow and drive efficiencies while we
continue to build upon our brand leadership positions.
Our restructuring effort has led to a more cost-effective global structure. For
the year, restructuring activities resulted in charges of $212 million, before
tax, and generated savings of about $47 million. These restructuring initiatives
are expected to produce savings of approximately $135 million annually.
When completed by the end of 2002, the company's global restructuring effort is
expected to produce annualized savings of between $225 million and $250 million.
These cost savings -- which have been driven by a reduction in working capital,
productivity improvements and benefits from restructuring initiatives -- assure
that our platform competitiveness can be leveraged into earnings expansion as we
continue to grow our global business.
Global Portfolio of Brands Advances
Contributing to our operating performance in 2001 was our global portfolio of
strong brands. Available in more than 170 countries, our 11 major brands combine
to make Whirlpool Corporation the world's top major appliance manufacturer and
marketer, with Whirlpool brand taking the lead as the world's No. 1 selling
appliance brand. Brastemp and Consul remain the top two brands in the Latin
American market. Our upscale brands include KitchenAid in the U.S. and Bauknecht
in Europe. And we remain the major supplier in many product categories for
Sears, Roebuck and Co.'s Kenmore brand appliances.
Whirlpool's global execution and performance capabilities allow us to create
differentiated positions and competitive advantages for our global portfolio of
brands. Each of our brands is taking advantage of these capabilities to build
higher levels of loyalty by developing closer relationships with its customers.
2002 Outlook
We do not anticipate broad-based recovery in the world's regional economies
until the second half of 2002. But even in such a challenging environment,
Whirlpool's customer loyalty strategy and global platform capabilities have
positioned our operations for continued performance growth.
Our brand organizations will introduce even more differentiated products and
services in 2002, while our restructuring and productivity efforts continue to
remove costs and provide reinvestment opportunities for brand building and
innovation activities. As a result of these actions, we expect to build on our
2001 achievements and deliver another strong performance for the full year in
2002.
Of course, none of last year's accomplishments would have been possible without
the extraordinary skills, leadership and teamwork of our employees. As we move
forward to execute our customer loyalty strategy and increase the pace of
innovation, I'm excited about the tremendous potential of our enterprise and the
value it will continue to create for our customers and shareholders.
David R. Whitwam
<PAGE>
Chairman of the Board and
Chief Executive Officer
February 28, 2002
Financial Hightlights
(millions of dollars, except per share data) 2001 2000 % change
- -------------------------------------------------------------------------------
Net sales $10,343 $10,325 0.2%
Core earnings, which excludes non-recurring items 371 367 1.1%
per share on a diluted basis* 5.45 5.20 4.8%
Earnings from continuing operations 34 367
per share on a diluted basis 0.50 5.20
Net earnings 21 367
per share on a diluted basis 0.31 5.20
Stockholders' equity 1,458 1,684 (13.4)%
Total assets 6,967 6,902 0.9%
Return on equity 1.3% 20.7%
Return on equity excluding non-recurring items* 22.2% 20.7%
Return on assets 0.4% 5.5%
Return on assets excluding non-recurring items* 5.6% 5.5%
Book value per share $ 21.44 $ 23.84 (10.1)%
Dividends declared per share 1.36 1.36
Average dividend yield 2.4% 2.6%
SHARE PRICE
High $ 74.20 $ 68.31
Low 45.88 31.50
Close 73.33 47.69 53.8%
Total return to shareholders
(five year annualized) 12.2% 0.3%
Shares outstanding (in 000's) 67,215 66,265
Number of shareholders 8,840 11,780
Number of employees 59,408 60,695
<PAGE>
*Non-recurring items for 2001 include restructuring and related charges, product
recall charges, discontinued operations and a change in accounting principle.
Presidents Message
During 2001, despite unanticipated economic turmoil and industry uncertainties,
our global operations delivered solid operating performances.
Whirlpool's global platform capabilities provided the resources, processes and
people to improve our core financial performance, reinvest in our brands and
execute our strategies. In 2001, these capabilities allowed us to reduce working
capital as a percentage of sales by 4 points. Over the last three years, we
have applied these capabilities to reduce selling, general and administrative
costs by $114 million and deliver an average of 3 percent total cost
productivity (net of inflation) improvements.
We have taken advantage of technology tools and robust process controls to
greatly enhance our global supply-chain efficiency. We also are applying
Internet-based tools to cut complexity and the costs of doing business for
Whirlpool and its trade partners -- which strengthens our distribution network
and relationships. These and other technological improvements are part of
Operational Excellence, Whirlpool's customized Six Sigma program to continuously
increase productivity.
Our brand groups introduced a record number of innovative products and services
during the year, and the response from consumers has been very positive. The
success of these introductions enabled us to grow our market share in virtually
every part of the world. In North America, our performance was at record levels.
Full-year revenues, unit sales, core operating profit, cash flow and market
share were at record levels, and the best overall results in the company's 90-
year history. New products sold through the company's value-added distribution
network created exceptional demand from consumers and trade partners, which led
to increased volumes and higher average selling prices. We ended the year in the
No. 1 position at eight of the top 10 appliance retailers in the United States,
and we increased our share of the construction and home remodeling market
segments by more than 10 percent.
In Europe, we improved our performance following a difficult second half in the
prior year. We realized better pricing, despite industry declines of
approximately 2 percent from 2000. We also enhanced our mix of products and
brands, as demonstrated by a 10-percent brand share gain by our Whirlpool brand.
And we improved our margin performance throughout the year by driving
productivity and restructuring savings, and by reducing our working capital as a
result of supply chain efficiencies.
In the first half of 2001, our Latin America organization skillfully managed
through the energy crisis in Brazil -- and responded well later in the year to
the financial crisis in Argentina. Throughout 2001, our operations produced
significant savings through enhanced productivity and strong improvements in
generating free cash flow. We also
<PAGE>
extended our market share by introducing a series of new products and services
under the Brastemp, Consul and Whirlpool brands -- the top three appliance
brands in the Latin American region.
Our Asia operations produced strong results in the first part of the year.
Second half performance was affected by market declines within the region. Even
as market demand declined in India, we gained market share through the
introduction of new products under the Whirlpool brand, which is the No. 1
selling brand among consumers in the country. In China, we significantly
expanded our distribution and brand presence. For the year, our sales grew by
more than 33 percent, and we continued to build our strong brand and market
position for future growth. We will continue to expand our position in these key
strategic markets of Asia in 2002.
In total, our regional businesses contributed to Whirlpool's solid operating
performance in 2001 by effectively carrying out our global strategy of
differentiating brands, rapid and relevant product innovation, and building
unmatched customer loyalty. The skill, commitment and creativity of Whirlpool
people and our global organization made this performance possible -- and will
enable us to deliver an even stronger performance in 2002.
Within this report, you'll find additional information about each of our
regional operations, including highlights of the innovation introduced by our
brand organizations throughout 2001.
Jeff M. Fettig
President and Chief Operating Officer
February 28, 2002
Operating Review
In 2001, our North American operations delivered an outstanding performance with
all-time records established in sales, core operating profit, cash flow and
market share. We grew total revenues for the year by 6 percent in an industry
that was down between 1 and 2 percent in revenues from the prior year. We also
improved our average selling price by almost 2 percent in a market environment
where most competitors had significant price declines.
Starting the year, most industry forecasts, including ours, had anticipated a
gradual strengthening of the economy, especially in the second half. However,
the forecasts did not foresee the economic uncertainty and eventual recession
that took hold in 2001.
Despite the uncertainty, consumer spending and the housing market remained
remarkably resilient. Consumers were especially receptive to new products and
services from Whirlpool Corporation -- released under the Whirlpool and
KitchenAid brands, as well as those under the Kenmore brand of appliances sold
by Sears, Roebuck and Co. Whirlpool's innovative, branded products and
services, made available through our value-added distribution channels
appealed to customers and contributed significantly to our record performances.
<PAGE>
These introductions are tangible examples of Whirlpool North America's drive to
deliver distinctive home solutions to customers and to create lifelong loyalty
for our brands. The Whirlpool brand Calypso wash motion clothes washer, for
example, uses new and unique wash technologies that give consumers the best
washing performance and largest capacity among top-loading washers and the
ability to dramatically conserve electricity and water.
In September, the front loading Duet clothes washer and dryer pair was launched,
yet another Whirlpool brand innovation that delivers exceptional performance in
washing, drying and overall energy efficiency. (Under the Sears Kenmore Elite
brand, the pair is sold as HE3t.) Unlike other front-loading washers, the Duet
washer -- built at Whirlpool's production facility in Schorndorf, Germany -- was
specifically produced to meet the ergonomic and styling preferences of North
American consumers. Designed by Whirlpool's global consumer product design
group, the distinctive styles of Calypso and Duet stand out on the retail floor
and fit in with the latest trends in home interior concepts.
These innovations also show Whirlpool's understanding of the role appliances can
play in conserving energy and reducing utility costs for consumers. Calypso and
Duet washers are part of a new line of Whirlpool brand energy-efficient
appliances for the home that meet or exceed the performance levels recommended
by the U.S. government's Energy Star(R) guidelines, which cover a wide range of
electric-powered devices. Other Whirlpool brand Energy Star qualified products
include the 900 Series dishwasher, the 2001 Conquest refrigerator, and air
conditioners and dehumidifiers.
At www.whirlpool.com, we also provide consumers with an online utility
cost-savings calculator, energy-conservation tips, and details about government
rebates and tax credits for purchasing Energy Star qualified appliances.
Whirlpool Corporation has been recognized as an Energy Star Partner of the Year
in 1999, 2000 and 2001.
Whirlpool also delivered innovation to the appliance distribution and retail
channel in 2001, with the introduction of Whirlpool brand Fabric Care Centers.
This dramatically styled "store within a store" retail-floor space invites
consumers to browse and experience the innovations of Whirlpool in one place.
Approximately 250 Fabric Care Centers opened in 2001 -- generating positive
sales growth with participating trade partners.
Innovative thinking -- focused on creating clear differentiation in the minds of
consumers --led to the launch of the Whirlpool brand AccuBake Duo System oven.
It's an advanced cooking oven that gives consumers the unsurpassed time-saving
ability to ensure uniform baking of all types of food through unique temperature
management technology.
The KitchenAid brand continued to broaden and extend its product line for home
cooking enthusiasts who value the quality and prestige of the KitchenAid name.
Introductions by the KitchenAid brand in 2001 included new countertop appliances
- -- such as juicers, the Professional 6 stand mixer, culinary tools and kitchen
textiles -- Energy Star qualified
<PAGE>
dishwashers and refrigerators, and the Pro Line series of ranges and cooktops
for consumers interested in the finest-quality cooking experience for the home.
The KitchenAid brand also launched Inspired Chef, a unique new business that
emerged from Whirlpool's corporate-wide innovation effort. Inspired Chef is a
national, in-home cooking school featuring instruction by working chefs, who
provide an intimate, one-of-a-kind culinary experience for people who love to
cook. In turn, the home environment gives Inspired Chef great opportunities to
promote and sell professional cooking products and accessories, many of them
under the KitchenAid brand.
Whirlpool also made significant inroads in developing Internet-linked kitchen
appliances during the year. When introduced in 2002, these i enabled appliances
from the Whirlpool brand will reduce the time to manage daily cooking and
household chores, while increasing consumer opportunities for personal or family
pursuits. The first of these appliances will appear in new planned communities
offering Internet-connected homes.
Whirlpool's customer focus extends throughout our organization, including our
Customer Centered Manufacturing approach, which has created new capabilities for
rapid product-line changes in tune with quickly evolving marketplace demands.
Combined with ongoing initiatives to improve efficiency and flexibility within
manufacturing processes, our increasingly Internet-enabled supply chain helped
to improve our overall productivity and increase cash flow. Our brand
organizations also are using the Internet to improve communications and stay in
constant contact -- every hour of every day -- with our North American trade
partners and customers.
Today, thanks to these efforts, trade partners now have the ability to save time
and improve efficiency in conducting routine business transactions with
Whirlpool. For example, equipped with a simple Internet Web browser, Whirlpool's
trade partners can order products, download promotional materials, or quickly
obtain details about their account and delivery status any time of the day. We
intend to continue developing new ways for trade partners and consumers to
better interact with Whirlpool and build stronger -- and even more rewarding --
relationships in the future.
We anticipate 2002 industry unit shipments to increase approximately 2 percent
from 2001 levels. In this environment, Whirlpool will once again continue to
introduce unique products and services that create exceptional value for
consumers throughout North America, and set new standards for the industry to
follow. As our brands continue to introduce innovative new products through our
value-added distribution network in 2002, our operations will drive ongoing
productivity and efficiency improvements throughout the supply chain. As a
result, we expect Whirlpool North America to deliver another record year of
performance in 2002.
In the midst of a challenging industry environment with
<PAGE>
pricing pressure and flat demand for appliances, European consumers responded
favorably to a number of innovative Whirlpool and Bauknecht brand products
introduced during the year. Bolstered by the power of our industry-leading
brands and our productivity improvements, Whirlpool Europe coped well within the
environment. By executing our strategy of differentiating our brands and
building strong and lasting relationships with our customers, our European
business strengthened the Whirlpool brand's No. 1 position within the region and
captured the leading market position in France.
Our expanding brand position in 2001 was due to the introduction of unique and
innovative products in each market we serve. For example, consumers throughout
the region enthusiastically welcomed the Whirlpool brand Maximo compact
microwave oven in 2001. The Maximo microwave takes up a small space on
countertops -- a feature popular with European consumers -- yet carries the same
inside cooking space as a traditional microwave oven. Its stylish look is an
extension of Whirlpool Europe's initiative to design futuristic concept
microwaves to meet the changing tastes and lifestyles of European consumers. The
initiative, called "Macrowave: New Frontiers for the Modern Microwave," involved
Whirlpool's unique global design and product-development capabilities, and
focused on the company's consumer lifestyle research study conducted throughout
Europe.
Whirlpool Europe also delivered innovative cooking-area concepts as the
Bauknecht brand introduced a new line of built-in ovens and ranges. The cooking
products provide customers with highly functional ovens and ranges that are easy
to control. The pleasing visual styles of these appliances are available in a
wide variety of colors and materials to meet the most demanding kitchen design
requirements.
The Bauknecht brand also introduced a full line of Intelligent Dialogue
dishwashers, clothes washers, dryers, refrigerators and freezers that carry the
highly sophisticated look derived from the company's unique global appliance
design process -- called visual brand language (VBL) -- as well as sensor-driven
technology for peak performance. These products stand out in the European
marketplace as smart, stylish and efficient solutions for household tasks.
For the Whirlpool brand, the release of the 6th Sense clothes washer resonated
with consumers because of its intelligent, easy-to-use controls. The 6th Sense
clothes washer has been recognized as one of the region's best in technology,
design, safety, and both water and energy efficiency. Energy efficiency
continued to be an important focus of Whirlpool Europe during 2001. In March,
the Whirlpool brand cabinet refrigerator received the European Energy+ award for
outstanding performance in reducing the use of electricity.
Whirlpool Europe extended productivity improvements in 2001 by driving
efficiencies throughout the region's supply chain, such as working with major
suppliers to move their production facilities into, or close to, our factories.
The region also made significant progress in applying Internet technology to its
business systems through the Tradeplace and Partner Store initiatives, which
enable trade partners faster, more convenient access to information on Whirlpool
products. Internet capabilities applied to home solutions will feature new
appliances and services that give consumers the ability to manage their
household tasks with greater ease than ever before.
<PAGE>
In 2002, Whirlpool Europe expects revenue gains from new product introductions,
price improvements and continued efforts to strengthen our brands in markets
throughout the region. We expect operating margins to improve as well, based
largely on our continued focus on productivity and restructuring initiatives.
Throughout the year, we will continue to deliver a strong product mix as our
brands compete in an industry where unit shipments are expected to remain on par
with 2001 levels.
Whirlpool Latin America strengthened its brand and market-leading position,
while coping well with a currency crisis in Argentina and an energy power
shortage in Brazil. Productivity improvement, prudent cost containment and
additional savings from restructuring activities improved Whirlpool Latin
America's operating margins. However, the political and economic issues in the
region combined to lower sales and total industry shipments. Nevertheless, our
Latin American business improved full-year core operating profit by 7 percent
from the prior year. This performance by our operations in a tough environment
continues to underline the strength of our brands and business in this important
market.
Our Embraco compressor business continued to deliver strong operating results in
2001 and maintained its leading worldwide market position. Whirlpool kept up its
pace of launching unique products in 2001 under the market-leading names of
Brastemp, Consul and Whirlpool.
Among the products introduced by the Brastemp brand were the new frost-free
Duplex refrigerator, the Solution dishwasher, the Intelligent stain remover
clothes washer and companion dryer, the Mosaic line of gourmet quality cooktops,
and the Jet Defrost microwave range.
The Consul brand introduced the Modular line of cabinet-built-in appliances; a
new 280-litre, single-door frost-free refrigerator; and Eficiencia Master, a new
line of energy-efficient room air conditioners.
Our Latin American brand groups carried out a broad and effective communications
campaign to raise consumer awareness of energy-conservation issues, as well as
the potential cost savings from switching to energy-efficient appliances. For
example, the Brastemp brand launched a new Internet site that enables consumers
to compare energy-efficiency ratings for products and other important features.
The site received the 2001 "I-Best" award, a prestigious recognition of Brazil's
top Internet site.
In response to Whirlpool Latin America's efforts to develop and introduce
appliances that conserve electricity, the Brazilian government recognized
Brastemp and Consul brand appliances among the most energy efficient in the
country. No fewer than 20 products received the "Procel" (energy saving) award.
Whirlpool Latin America's success in developing, launching and marketing
energy-efficient appliances provided significant positive momentum for the
region's operating performance in 2001.
<PAGE>
The year also marked the introduction of the legendary KitchenAid brand stand
mixer into Latin America and the launch of the Brastemp brand Professional
Quality line of countertop appliances, including blenders, food processors and
automatic coffee makers.
Whirlpool expects to maintain its market leadership in Latin America by a wide
margin in 2002, thanks largely to the strength of its Brastemp and Consul
brands. We expect Latin American appliance industry unit shipments to increase
slightly from the 2001 level. In this environment, we will further expand our
strong positions in Brazil, Argentina and Chile, and significantly increase our
exports to other markets in the world, which should result in moderate revenue
growth and improved operating margins.
India and China -- the two largest markets served by Whirlpool Asia -- performed
well in this highly competitive region during 2001. In both countries, consumer
demand for the Whirlpool brand helped drive higher unit shipments for the year,
thanks largely to the introduction of new, innovative products. In India, our
operations increased the Whirlpool brand market share of the refrigeration
segment to 30 percent and the washing machine segment to 25 percent.
Still, all of our key operations in the region felt the aftershocks of September
11, which affected year-end sales and unit shipments, especially outside of
India and China.
A host of new products were launched by Whirlpool Asia during 2001. In China,
the Whirlpool brand Water Genie washer, a new vertical-axis clothes washer,
and the large capacity Fire Genie microwave with grilling capability, were
received well by Chinese consumers. Whirlpool expanded its distribution network
in China during the year, setting the stage for future gains in sales and
market share in this critical emerging market.
Consumers in India also were introduced to innovative clothes washers, including
the fully automatic Whirlpool brand Whitemagic Hotwash and the semiautomatic
Whitemagic washers. Both models -- which contain built-in heaters that optimize
detergent action and agitators that are gentle to clothes and reduce tangling --
have the distinction of being an "industry first." The Whitemagic washer also
provides larger capacity, a feature that appeals to consumers who said they want
to wash bed linens in their machines.
Equally important to consumers in the Indian market, the top-loading Whitemagic
Hotwash washer is particularly effective in cleaning white fabrics and in
retaining their sparkle. This is significant in a culture that associates white
with good hygiene and purity.
Additional introductions in India under the Whirlpool brand were the expanded
range of Ice Magic refrigerators and QuickChill frost-free refrigerators. These
refrigerators deliver ice quickly -- even during India's peak seasonal heat
waves. And with quick delivery of ice comes quick cooling, a key
consumer-desired feature in India's climate.
Whirlpool India also made its entry into the cooking category with the
introduction of MagiCook microwave ovens and gas cooking ranges. Both products,
positioned as the "tastiest way to good health," have been well received by
Indian consumers. The MagiCook microwave delivers a unique-to-India feature, a
"microtawa" -- which adapts
<PAGE>
the tawa, a traditional rounded plate used in cooking a variety of Indian
breads, to a modern appliance.
India's Engineering Export Promotion Council awarded Whirlpool India its
"Certificate of Export Excellence" as the country's leading exporter of white
goods, a distinction in line with India's increasing emphasis on open markets
and free trade. Our Indian operations currently export to 40 countries
throughout South Asia, the Pacific Rim, the Middle East, Africa, Latin America
and the Caribbean.
In 2002, we will continue to expand our leading brand position in India by
offering new full lines of air conditioning and microwave oven products.
Whirlpool Asia expects growth in consumer demand from India and China in 2002,
while for the entire region, industry demand is expected to match 2001 levels.
North America Key Stats
Key Statistics
- - No. 1 position in the industry
- - $6.6 billion in 2001 sales
- - $758 million in 2001 core operating profit
- - Approximately 25,000 employees
Brands
United States KitchenAid, Whirlpool, Roper, Cielo
Canada Inglis,Whirlpool, KitchenAid
Mexico Whirlpool, Acros, Supermatic, Crolls
Principal Products
Air Purifiers, Automatic Dryers, Automatic Washers, Built-in Ovens,
Countertop Appliances, Dehumidifiers, Dishwashers, Freezers,
Hot Water Heaters, Ice Makers, Jetted and Soaking Tubs, Microwave Ovens, Ranges,
Refrigerators, Room Air Conditioners, Trash Compactors
Headquarters
Benton Harbor, MI
Manufacturing Locations
United States La Vergne, TN; Findlay, OH; Marion, OH;
Greenville, OH; Clyde, OH; Benton Harbor, MI; Evansville, IN;
Fort Smith, AR; Tulsa, OK; Oxford, MS
Canada Montmagny, QU
Mexico Monterrey, Reynosa, Celaya, Puebla
new products introduced in 2001
Whirlpool brand AccuBake Duo System, Conquest and Whirlpool Gold energy
------------------------------ -------------
efficient refrigerators Calypso wash motion clothes washer; Senseon clothes
dryer; Duet frontloading washer and dryer; Tall Tub dishwasher KitchenAid brand
6" dual fuel range, Ultima Cook MWO; 30" dual fuel range in cobalt blue; Fully
Integrated Dishwasher; Chef's Chopper; Juicer; Coffee Grinder; Culinary Utensils
& Gadgets; Kitchen Textiles; KitchenAid Stand Mixer-90 in copper and brushed
nickel
Europe Key Stats
<PAGE>
Key Statistics
- - No. 3 position as manufacturer; No. 1 as brand
- - $2.1 billion in 2001 sales
- - $39 million in 2001 core operating profit
- - Approximately 12,000 employees
Brands
Whirlpool, Bauknecht, Ignis, Laden in France, KIC in South Africa
Principal Products
Automatic Dryers, Automatic Washers, Built-in Hobs, Built-in Ovens,
Compressors, Dishwashers, Free-standing Cookers, Freezers,
Microwave Ovens, Ranges, Refrigerators
operations center
Comerio, Italy
Manufacturing Locations
Sweden Norrkoping
Italy Naples, Siena, Cassinetta, Trento
France Amiens
Germany Neunkirchen, Schorndorf
Slovakia Poprad
South Africa Isithebe
New products introduced in 2001
Whirlpool brand Maximo microwave oven; Talent microwave oven; Point System
dishwasher; Built-in cooking range; DD 430 liter refrigerator
Bauknecht brand Intelligent Dialogue, a full line of free-standing
appliances including refrigeration, dishwashers, and clothes washers and dryers
Latin America Key Stats
Key Statistics
- - No. 1 market position in the industry
- - $1.5 billion in 2001 sales
- - $134 million in 2001 core operating profit
- - Approximately 16,000 employees
Brands
Whirlpool, Brastemp, Consul, Embraco, Eslabon de Lujo
Principal Products
Automatic Washers, Compressors, Countertop Appliances, Dishwashers, Freezers,
Microwave Ovens, Ranges, Refrigerators, Room Air Conditioners
Headquarters
Sao Paulo, Brazil; Buenos Aires, Argentina; Santiago, Chile
Manufacturing Locations
Brazil Manaus, Rio Claro, Joinville, Sao Paulo
Argentina San Luis
International (Embraco) Italy - Riva di Chieri; Slovakia - Spisska Nova Ves;
China - Beijing
<PAGE>
new products introduced in 2001
Brastemp brand All Refrigerator and Frost Free Freezer; Electronic Frost Free
Freezers;
Intelligent stain removing washing machine; Solution
dishwasher; Mosaic built-in appliances; Intelligent dryer; Professional Quality
Countertop Appliances (blender, food processor, coffee machine and KitchenAid
brand Stand Mixer); Jet Defrost microwave;
Inside Freezer Refrigerator; Duplex Frost Free refrigerator
Consul brand Eficiencia Master and Consul 7,500 BTU with timer
air conditioners; Modular cabinet built-in appliances;
Single Door, 280 liter refrigerator.
Asia Key Stats
Key Statistics
- - Leader among Western companies, with No. 1 market position in India
- - $373 million in 2001 sales
- - $19 million in 2001 core operating profit
- - Approximately 6,000 employees
Brand
Whirlpool
Principal Products
Automatic Washers, Compressors, Microwave Ovens, Refrigerators
Headquarters
Hong Kong, PRC
Manufacturing Locations
India Faridabad, Pune, Pondicherry
China Shanghai, Shunde
new products introduced in 2001
Whirlpool brand Water Genie; Fire Genie microwave; Whitemagic Hotwash clothes
washer; Ice Magic refrigerator; QuickChill frost-free refrigerator; MagiCook
microwave
ovens and gas cooking ranges
Financial Contents
Management's Discussion and Analysis 29
Consolidated Statements of Earnings 36
Consolidated Balance Sheets 37
Consolidated Statements of Cash Flows 39
Consolidated Statements of Changes in Stockholders' Equity 40
Notes to Consolidated Financial Statements 41
Reports of Independent Auditors and Management 59
Eleven-Year Consolidated Statistical Review 60
Directors and Senior Management 62
Stockholders' and Other Information 63
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The consolidated statements of earnings summarize operating results for the last
three years. This section of Management's Discussion and Analysis highlights the
main factors affecting changes in operating results during the three-year
period.
EARNINGS
Earnings from continuing operations were $34 million in 2001 versus $367 million
and $347 million in 2000 and 1999. The significant decrease in 2001 results is
due to charges from the company's previously announced restructuring program and
product recalls. Net earnings also included a charge for discontinued operations
and a gain due to a change in accounting principle.
<TABLE>
<CAPTION>
(millions of dollars, except per share data) 2001 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings from continuing operations $ 34 $ 367 $ 347
Diluted earnings per share from continuing operations 0.50 5.20 4.56
Net earnings 21 367 347
Diluted net earnings per share 0.31 5.20 4.56
Core earnings 371 367 407
Diluted core earnings per share 5.45 5.20 5.35
- ---------------------------------------------------------------------------------------------
</TABLE>
The company provides core earnings analysis as a view of the company's
underlying strength of operations. The term "core earnings" refers to earnings
from continuing operations excluding the effects of 2001 restructuring and
related charges, 2001 product recall charges and the first quarter 1999
Brazilian currency devaluation.
Core earnings improved for 2001 due to a strong performance in the company's
North American operations, which achieved record market share in the company's
largest market, and benefits from the company's ongoing restructuring program.
These combined to offset significant economic challenges in its European
markets. Core earnings for 2000 were affected by the impact of a slowing
industry and intense pricing pressures in the company's two largest markets,
North America and Europe.
The table below reconciles core earnings to net earnings. The adjustments to
arrive at net earnings are presented in the table on an after-tax and minority
interests basis and reference the related note to the accompanying consolidated
financial statements:
<TABLE>
<CAPTION>
(millions of dollars) 2001 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Core earnings from operations $ 371 $ 367 $ 407
Restructuring and related charges (note 10) (156) - -
Product recall charges (note 11) (181) - -
Brazil currency devaluation - - (60)
- ---------------------------------------------------------------------------------------------
Earnings from continuing operations 34 367 347
- ---------------------------------------------------------------------------------------------
Discontinued operations (note 4) (21) - -
Cumulative effect of change in accounting principle (note 1) 8 - -
- ---------------------------------------------------------------------------------------------
Net earnings $ 21 $ 367 $ 347
=============================================================================================
</TABLE>
The company does not anticipate a broad-based recovery in the world's regional
economies until the second half of 2002. However, the company expects to
build on
<PAGE>
its 2001 performance in 2002 and deliver a 15 to 20 percent increase in first
quarter core earnings per share and a 5-to-10 percent increase in full year core
earnings per share. Net earnings are anticipated to include additional charges
to complete the previously announced restructuring program (see Note 10 of the
notes to consolidated financial statements). These charges for 2002 are
estimated to be in the range of $100 million to $150 million pre-tax. In
particular, the company currently expects its European operating margins to
improve in 2002, based on continued focus on productivity and restructuring
initiatives.
NET SALES
The total number of units sold in 2001 increased 2% over 2000. Consolidated net
sales increased slightly over 2000 despite the negative impact from currency
fluctuations. Excluding currency fluctuations, net sales would have increased 3%
over 2000. Excluding the impact of currency fluctuations, net sales were up 1%
in 2000 over 1999. The tables below provide the breakdown of units and sales by
region.
<TABLE>
<CAPTION>
(in thousands) 2001 Change 2000 Change 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units Sold
North America 21,404 3.7% 20,634 3.9% 19,862
Europe 10,803 (0.7) 10,876 3.9 10,469
Latin America 4,738 (3.7) 4,918 2.3 4,809
Asia 2,050 4.7 1,958 5.4 1,858
Other/eliminations (36) - (31) - (49)
- ----------------------------------------------------------------------------------------
Consolidated 38,959 1.6% 38,355 3.8% 36,949
========================================================================================
<CAPTION>
(millions of dollars) 2001 Change 2000 Change 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales
North America $ 6,581 5.8% $ 6,223 1.0% $ 6,159
Europe 2,058 (4.5) 2,156 (12.1) 2,452
Latin America 1,487 (12.8) 1,706 2.3 1,668
Asia 373 (4.4) 390 4.0 375
Other/eliminations (156) - (150) - (143)
- ----------------------------------------------------------------------------------------
Consolidated $ 10,343 0.2% $ 10,325 (1.8)% $ 10,511
========================================================================================
</TABLE>
Significant regional trends were as follows:
. In 2001, North American unit volumes increased 4% in an industry that was
down slightly. This resulted in record market share in the region and a 1.4
pts increase over 2000. In 2000, major appliance shipments exceeded the 2%
industry-wide growth. Net sales increased slower than unit volumes as
competitive pricing pressures reduced average sales values.
. European unit volumes were down versus 2000 due primarily to the economic
downturn affecting the European market. Market share remained level as unit
shipments were in line with the industry. Net sales decreased due to currency
fluctuations and continued pricing pressures. Excluding currency impact, net
sales decreased 1%. European unit volumes increased in line with industry
growth during the 2000 versus 1999 comparison. Net sales decreased, however,
as currency fluctuations and pricing
<PAGE>
pressures offset the higher volume. Excluding the impact of currency
fluctuations, net sales in 2000 would have been level with 1999.
n Unit shipments in Latin America decreased versus 2000 due to the economic
slowdown, which included an energy crisis in Brazil and the Argentine economic
crisis. The region's sales were also heavily affected by currency fluctuations
and the slowing global economy's impact on export sales. Excluding the impact of
currency fluctuations, net sales increased 1%. Positive economic trends during
2000 contributed to an increase in unit shipments over 1999. The increased
volume and price increases implemented during 2000 drove the increased revenue.
n Asia's unit sales increased over 2000, but net sales declined as the
negative impact from currency and pricing pressures combined to offset the
higher unit volume. Excluding currency fluctuations, net sales increased 1%.
Unit shipments increased 5% and 43% in the Indian and Chinese markets, which
represent the larger markets in the company's Asian region. During 2000, Asia
continued a positive trend as both units and revenue increased year-over-year.
n In 2002, appliance industry shipments are expected to increase 2% in North
America, increase slightly in Latin America, and be flat in Europe and Asia.
GROSS MARGIN
The consolidated gross margin percentage in 2001 declined versus 2000 due to $53
million of restructuring related charges (see "Restructuring and Related
Charges") and continued global pricing pressures offsetting productivity
improvements. Excluding these charges, the consolidated gross margin declined
0.2 percentage points year-over-year. The gross margin percentage declined in
2000 versus 1999 due to global pricing pressures and higher material costs
offsetting productivity improvements and pension credits. The table below
outlines the gross margin percentages by region, excluding the impact of the
2001 restructuring related charges.
<TABLE>
<CAPTION>
2001 Change 2000 Change 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross margin
North America 23.5% (0.8)pts 24.3% (1.1)pts 25.4%
Europe 21.3 (2.0) 23.3 (2.6) 25.9
Latin America 26.0 3.1 22.9 (0.2) 23.1
Asia 26.2 0.1 26.1 1.0 25.1
- -----------------------------------------------------------------------------------------------------------------------
Consolidated, before restructuring related charges 23.9% (0.2)pts 24.1% (1.2)pts 25.3%
- -----------------------------------------------------------------------------------------------------------------------
Restructuring related charges (0.5)% (0.5)pts - - -
- -----------------------------------------------------------------------------------------------------------------------
Consolidated 23.4% (0.7)pts 24.1% (1.2)pts 25.3%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Significant regional trends were as follows:
n North American gross margin declined versus 2000 due to unfavorable product
and channel mix, lower pension credits and increased warranty costs offsetting
productivity improvements. The decline in 2000 versus 1999 was due to
industry-wide price deterioration, unfavorable product and channel mix and
increased engineering and product launch expenses. These factors were partially
offset by volume increases, ongoing productivity improvements and pension
credits.
<PAGE>
. The European gross margin was down versus 2000 due to higher material costs,
an inventory write-down and continued pricing pressures. The margin did,
however, improve throughout the year due to productivity gains and benefits
from the restructuring effort. In 2000, the gross margin decreased due to
intensified price competition, rising material costs and slowing demand.
. Latin American gross margin improved over 2000 as an improved product mix, a
reduction in pension liabilities, productivity gains and restructuring
benefits offset material price increases and pricing pressures. The 2000
gross margin ended the year level with 1999 as higher material costs were
offset by sales tax credits.
. The Asian gross margin remained strong in 2001 as productivity improvements
and product mix offset pricing pressures due to weakening economies included
in this region.
SELLING, GENERAL AND ADMINISTRATIVE
Consolidated selling, general and administrative expenses as a percent of net
sales decreased versus 2000 as cost controls implemented in North America and
global restructuring benefits more than offset increased bad debt expense,
increased stock compensation costs, new product introduction costs,
restructuring related charges and lower pension credits. Consolidated selling,
general and administrative expenses as a percent of net sales decreased in 2000
versus 1999 due primarily to pension credits in North America and cost
containment efforts in Europe and Brazil offsetting additional spending related
to brand strategies. The table below outlines the selling, general and
administrative expenses as a percentage of sales by region, excluding the impact
of the 2001 restructuring related charges.
<TABLE>
<CAPTION>
As a As a As a
Percentage Percentage Percentage
(millions of dollars) 2001 of Sales 2000 of Sales 1999 of Sales
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Selling, general &
administrative expenses
North America $ 788 12.0% $ 825 13.3% $ 838 13.6%
Europe 386 18.8 386 17.9 443 18.1
Latin America 250 16.8 263 15.4 263 15.8
Asia 74 19.9 76 19.4 76 20.3
Corporate 132 - 101 - 133 -
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated, before restructuring related charges $ 1,630 15.8% $ 1,651 16.0% $ 1,753 16.7%
- -------------------------------------------------------------------------------------------------------------------------------
Restructuring related charges 9 - - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated $ 1,639 15.8% $ 1,651 16.0% $ 1,753 16.7%
===============================================================================================================================
</TABLE>
PRODUCT RECALLS
During the third and fourth quarters of 2001, the company recognized a total of
$295 million of pre-tax charges ($181 million after-tax) related to two separate
product recalls. These charges have been recorded as a separate component of
operating profit. Cash costs of $56 million were paid in 2001 and the remaining
projected after-tax cash costs of these recalls of $125 million will be realized
over the next several quarters and funded
<PAGE>
primarily with cash on hand and cash generated from operations. See Note 11 of
the notes to consolidated financial statements for a more detailed description
of these charges.
The company's estimated liability for product recall expenses is impacted by
several factors such as customer contact rate, consumer options, field repair
costs, inventory repair costs, extended warranty costs, communication structure
and other miscellaneous costs such as legal, logistics and consulting. The
customer contact rates, which represent an estimate of the total number of
units to be serviced as a percentage of the total number of units impacted by
the recall, is the most significant factor in estimating the total cost of each
recall. The customer contact rate used to measure the company's product recall
liability as of December 31, 2001 was 65% for the microwave hood combination
units recall and 50% for the dehumidifier recall. These rates are impacted by
several factors, including the type of product, the year manufactured, age of
products sold and current and past experience factors. A 10% shift in this rate
would cause an approximate 10% to 15% change in the cost of the recalls.
RESTRUCTURING AND RELATED CHARGES
During 2001, the company's various restructuring initiatives resulted in pre-tax
restructuring charges of $150 million, which have been identified as a separate
component of operating profit. As a result of the company's restructuring
activity, the company also recognized $62 million pre-tax of restructuring
related charges during 2001, which were recorded primarily within cost of
products sold. Refer to Note 10 of the notes to consolidated financial
statements for a more detailed description of these charges.
In December 2000, the company announced a global restructuring plan that when
fully implemented is currently expected to result in pre-tax charges of between
$300 and $350 million and annualized savings of between $225 and $250 million.
The plan is expected to eliminate approximately 6,000 positions worldwide and
the final phases will be announced over the first half of 2002. Through December
31, 2001, the company incurred $212 million in restructuring and related charges
and eliminated approximately 3,700 positions. The company expects to realize
approximately $135 million in annualized benefits from the 2001 initiatives. The
company expects to use cash on hand and cash generated from operations to fund
the remaining restructuring initiatives.
OTHER INCOME AND EXPENSE
Interest income and sundry income (expense), which includes foreign currency
gains and losses, financial service fees in Latin America and miscellaneous
asset dispositions were essentially level with 2000. Interest income and sundry
income (expense) was $145 million favorable in 2000 versus 1999 due primarily to
the impact of the Brazilian currency devaluation in 1999. This was partially
offset by lower interest income in 2000 as the company reduced short term
investments. The devaluation of the Brazilian real in the first quarter of 1999
resulted in a $158 million pre-tax charge to earnings (Whirlpool's share
after-tax and minority interest was $60 million). For the full year 1999,
foreign exchange losses related to Brazil totalled $192 million pre-tax
(Whirlpool's share after-tax and minority interest was $76 million).
Interest expense decreased $18 million versus 2000 due to lower overall
borrowings and a declining interest rate environment. Interest expense increased
$14 million in 2000 versus 1999 due primarily to higher interest rates and
higher average debt balances.
INCOME TAXES
<PAGE>
The effective income tax rate from continuing operations was 35% in 2001
(excluding the impact of the product recalls and restructuring and related
charges), 35% in 2000 and 37% in 1999 (excluding the impact of the Brazilian
currency devaluation). The lower effective tax rate for 2001 and 2000 versus
1999 was primarily due to Brazilian export incentives utilized during 2001 and
2000 (discussed under "Other Matters"), which are nontaxable.
Including the impact of the 2001 charges mentioned above, the effective income
tax rate was 46%. Including the impact of the Brazilian currency devaluation,
the effective income tax rate for 1999 was 38%. See the income tax rate
reconciliation included in Note 12 of the notes to the consolidated financial
statements for a description of the significant items impacting the company's
consolidated effective income tax rate.
CASH FLOWS
The statements of cash flows reflect the changes in cash and equivalents for the
last three years by classifying transactions into three major categories:
operating, investing and financing activities.
OPERATING ACTIVITIES
The company's main source of cash flow is from operating activities consisting
of net earnings from operations adjusted for changes in operating assets and
liabilities such as receivables, inventories and payables and for non-cash
operating items such as depreciation.
Cash provided by operating activities totalled $1,024 million in 2001, $445
million in 2000 and $801 million in 1999. The increase in 2001 includes a $527
million improvement in working capital cash flows versus 2000, of which $464
million was in accounts receivable. The decrease in 2000 versus 1999 was due
primarily to an increase in accounts receivable and prepaid pension costs,
partially offset by an increase in accounts payable.
INVESTING ACTIVITIES
The principal recurring investing activities are property additions. Net
property additions were $378 million, $375 million and $437 million in 2001,
2000 and 1999.
On October 5, 2001, the company sold its position in a portfolio of cross
currency interest rate swaps resulting in the receipt of $209 million.
On January 7, 2000, the company completed its tender offer for the outstanding
publicly traded shares in Brazil of its subsidiaries Brasmotor and Multibras
S.A. Eletrodomesticos (Multibras). In completing the offer, the company
purchased additional shares of Brasmotor and Multibras for $283 million,
bringing its equity interest in these companies to approximately 94%. With this
additional investment, the company's equity interest in all its Brazilian
subsidiaries increased from approximately 55% to approximately 87%.
FINANCING ACTIVITIES
Dividends paid to stockholders totaled $113 million, $70 million and $103
million in 2001, 2000 and 1999. The increase in 2001 was affected by the timing
of funding for the fourth quarter 2000 payment, which was paid on January 2,
2001.
On July 3, 2001, the company issued 300 million euro denominated 5.875%
Notes due 2006. The notes are general obligations of the company and the
proceeds were used for general corporate purposes.
<PAGE>
Under its stock repurchase program, the company purchased 0.7 million shares
($43 million) in 2001, 8.7 million shares ($427 million) in 2000 and 2.6 million
shares ($167 million) in 1999. See Note 8 of the notes to consolidated financial
statements for additional detail on the company's stock repurchase program.
The company's net borrowings decreased by $569 million in 2001, excluding the
effect of currency fluctuations. The decrease was in short-term notes payable
and funded by cash generated from operations.
The company's net borrowings increased by $546 million in 2000, excluding the
effect of currency fluctuations. The primary increase was in short-term notes
payable.
FINANCIAL CONDITION AND LIQUIDITY
The financial position of the company remains strong as evidenced by the
December 31, 2001 balance sheet. The company's total assets were $7.0 billion
and stockholders' equity was $1.5 billion at the end of 2001 versus $6.9 billion
and $1.7 billion respectively at the end of 2000. The decrease in stockholders'
equity during 2001 was due primarily to $184 million of foreign currency
translation and $90 million in dividends declared.
The overall debt to invested capital ratio of 48.0% in 2001 was down from 49.4%
in 2000 due to lower short-term borrowings more than offsetting an increase in
long-term debt and lower stockholders' equity. The increase in long-term debt is
due to the reclassification on January 1, 2001, of a $221 million positive cash
position on previously held net investment hedges from a contra debt account to
other long-term assets in accordance with SFAS No. 133, and the 300 million euro
denominated notes issuance. The company's debt continues to be rated investment
grade by Moody's Investors Service Inc. (Baa1), Standard and Poor's (BBB+) and
Fitch IBCA, Duff & Phelps (A-).
On June 1, 2001, the company entered into an $800 million five-year committed
credit agreement and a committed $400 million 364-day credit agreement that
provide backup liquidity. At December 31, 2001, there were no borrowings under
these agreements, which represent the company's total committed credit lines.
See Note 6 of the notes to consolidated financial statements for additional
details on the company's committed credit facilities and the company's debt
obligations.
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. The company currently does not have any
off-balance-sheet financing arrangements. See Note 14 of the notes to
consolidated financial statements for detail on the company's contingent
liabilities.
In February 2002, the company reached an agreement in principle to acquire the
remaining 51% interest in Vitromatic S.A. de C.V., an appliance manufacturing
and distribution joint venture in Mexico. The company expects to complete the
purchase for $150 million in cash and to assume 100 percent of the joint
venture's existing $220 million in debt. This acquisition is expected to produce
annual sales of more than $400 million when consolidated, and to be accretive
to the company's earnings by the second half of 2002.
Other matters
The consolidated financial statements are prepared in accordance with generally
accepted accounting principles, which require the company to make estimates and
assumptions
<PAGE>
(see Note 1 of the notes to consolidated financial statements). The company
believes the following critical accounting policies involve a higher degree of
judgement and complexity: recognition of Brazilian export incentive credits
(Befiex)-see below; product recalls-see Note 11 of the notes to consolidated
financial statements; and pension and postretirement medical benefit plans-see
Note 13 of the notes to consolidated financial statements.
In 1996, the company's Brazilian subsidiaries obtained a favorable decision with
respect to additional export incentives in connection with the Brazilian
government's export incentive program (Befiex). This decision also recognized
the right to utilize these credits as an offset against current Brazilian
federal excise tax on domestic sales. The company's remaining available credits
were approximately $315 million as of December 31, 2001, of which the company
expects to recognize $40 million in 2002 and further amounts in subsequent
years. The amounts recognized are dependent on the company's excise tax levels
and the outcome of the ongoing litigation surrounding Befiex. The company
recognized Befiex credits of $53 million (Whirlpool's share after minority
interest was $50 million) in 2001 and $52 million (Whirlpool's share after
minority interest was $49 million) in 2000 as a reduction of current excise
taxes payable and therefore an increase in net sales. These credits approximated
4% and 3% of the region's net sales during 2001 and 2000 and are currently
expected to represent 3% of 2002 net sales.
During 1999, the company recorded $58 million pre-tax (Whirlpool's share
after-tax and minority interest was $20 million) of recovered Brazilian sales
taxes paid in prior years.
At December 31, 2001, the company's consolidated prepaid pension asset was
$136 million up from $47 million at December 31, 2000. The increase was
principally due to the recognition of pension credits. The company recognized
consolidated pre-tax pension credits of $70 million in 2001 and $98 million in
2000 and pension expense of $21 million in 1999. The company currently expects
that pension credits related to its U.S. plans will decrease approximately
$30 million in 2002 due primarily to reductions in the discount rate and
expected rate of return on plan assets.
Although most of its assets have been divested, Whirlpool Financial Corporation
(WFC) remains a legal entity with assets consisting primarily of a leveraged
lease portfolio. The portfolio includes investments in aircraft leveraged leases
and is impacted by the economic conditions of the aviation industry. The company
continues to monitor its arrangements with the lessees and the value of the
underlying assets.
On December 31, 2001, twelve nations completed the conversion to a common
currency, the "euro." The company's internal computer systems and business
processes have been changed to accommodate the new currency. The company has
significant manufacturing operations and sales in these countries and the
introduction of the euro has eliminated transaction gains and losses within
participating countries. There was no significant impact on operating results
from this change.
MARKET RISK
The company is exposed to market risk from changes in foreign currency exchange
rates, domestic and foreign interest rates, and commodity prices, which can
affect its operating results and overall financial condition. The company
manages its exposure to these market risks through its operating and financing
activities and, when deemed appropriate, through the use of derivative financial
instruments. The company's derivative financial instruments are risk management
tools and are not used for speculation or for trading
<PAGE>
purposes. Derivative financial instruments are entered into with a diversified
group of investment grade counterparties to reduce the company's exposure to
nonperformance on such instruments. The company's sensitivity analysis reflects
the effects of changes in market risk but does not factor in potential business
risks.
The company uses foreign currency forward contracts and options from time to
time to hedge the price risk associated with firmly committed and forecasted
cross-border payments and receipts related to its ongoing business and
operational financing activities. Foreign currency contracts are sensitive to
changes in foreign currency exchange rates. At December 31, 2001, a ten percent
unfavorable exchange rate movement in the company's portfolio of foreign
currency forward contracts would have resulted in an incremental unrealized loss
of $75 million, while a ten percent favorable shift would have resulted in an
incremental unrealized gain of $67 million. Consistent with the use of these
contracts to neutralize the effect of exchange rate fluctuations, such
unrealized losses or gains would be offset by corresponding gains or losses,
respectively, in the remeasurement of the underlying transactions being hedged.
The company uses commodity futures contracts to hedge the price risk associated
with firmly committed and forecasted commodities purchases that are not hedged
by contractual means directly with suppliers. As of December 31, 2001, a ten
percent shift in commodity prices would have resulted in an incremental $1
million gain or loss related to these contracts.
The company utilizes interest rate swaps to hedge its interest rate risk. As of
December 31, 2001, a ten percent shift in interest rates would have resulted in
an incremental $1 million gain or loss related to these contracts. Since the
company's debt was primarily fixed rate at year-end, a ten percent shift in
interest rates would have an immaterial effect on operating results.
RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 2001, the company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, resulting in a cumulative
effect of an accounting change of $8 million of income, net of tax, in the
company's statement of earnings and an $11 million decrease, net of tax, in
stockholders' equity. See Notes 1 and 7 of the notes to consolidated financial
statements.
In June 2001, the Financial Accounting Standards Board issued SFAS
No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 141 also
includes guidance on the initial recognition and measurement of goodwill and
other intangible assets arising from business combinations completed after June
30, 2001. Under SFAS No. 142, goodwill and indefinite lived intangible assets
will no longer be amortized but will be reviewed at least annually for
impairment. Intangible assets that are not deemed to have an indefinite life
will continue to be amortized. Application of the non-amortization provisions of
SFAS No. 142 is expected to result in an increase in net earnings of
approximately $23 million in 2002. The company has not yet determined the
financial impact that the impairment provisions of SFAS No. 142 will have on its
earnings or its consolidated financial position. See Note 2 of the notes to
consolidated financial statements.
FORWARD-LOOKING STATEMENTS
<PAGE>
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the company. Management's
Discussion and Analysis and other sections of this report may contain
forward-looking statements that reflect our current views with respect to future
events and financial performance.
Certain statements contained in this annual report and other written and oral
statements made from time to time by the company do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" that provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "estimate," "expect," "intend," "may," "could,"
"possible," "plan," "project," "will," "forecast," and similar words or
expressions. The company's forward-looking statements generally relate to its
growth strategies, financial results, product development, and sales efforts.
These forward-looking statements should be considered with the understanding
that such statements involve a variety of risks and uncertainties, known and
unknown, and may be affected by inaccurate assumptions. Consequently, no
forward-looking statement can be guaranteed and actual results may vary
materially.
Many factors could cause actual results to differ materially from the company's
forward-looking statements. Among these factors are: (1) competitive pressure to
reduce prices; (2) the ability to gain or maintain market share in an intensely
competitive global market; (3) the success of our global strategy to develop
brand differentiation and brand loyalty; (4) our ability to control operating
and selling costs and to maintain profit margins during industry downturns; (5)
continuation of our strong relationship with Sears, Roebuck and Co. in North
America, which accounted for approximately 21% of our consolidated net sales of
$10.3 billion in 2001; (6) currency exchange rate fluctuations in Latin America,
Europe, and Asia that could affect our consolidated balance sheet and income
statement; (7) our ability to continue to recognize Befiex credits as described
in more detail in the "Other Matters" section within Management's Discussion and
Analysis; (8) the completion of the company's microwave-hood combination and
dehumidifier recalls and their impact on consumer preferences; (9) the
effectiveness of the series of restructuring actions the company anticipates
taking through 2002; and (10) social, economic, and political volatility,
including potential terrorist activity, in the North American, Latin American,
European and Asian economies.
The company undertakes no obligation to update every forward-looking statement,
and investors are advised to review disclosures by the company in our filings
with the Securities and Exchange Commission. It is not possible to foresee or
identify all factors that could cause actual results to differ from expected or
historic results. Therefore, investors should not consider the foregoing factors
to be an exhaustive statement of all risks, uncertainties, or factors that could
potentially cause actual results to differ.
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
Year ended December 31 (millions of dollars, except per share data) 2001 2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 10,343 $ 10,325 $ 10,511
Expenses
Cost of products sold 7,925 7,838 7,852
Selling, general and administrative 1,639 1,651 1,753
Intangible amortization 28 29 31
Product recall costs 295 - -
Restructuring costs 150 - -
- -------------------------------------------------------------------------------------------------------
Operating profit 306 807 875
=======================================================================================================
Other income (expense)
Interest income and sundry (51) (50) (195)
Interest expense (162) (180) (166)
- -------------------------------------------------------------------------------------------------------
Earnings before income taxes and other items 93 577 514
Income taxes 43 200 197
- -------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before equity earnings and minority interests 50 377 317
Equity in affiliated companies (4) 3 (4)
Minority interests (12) (13) 34
- -------------------------------------------------------------------------------------------------------
Earnings from continuing operations 34 367 347
Loss from discontinued operations, net of tax (21) - -
Cumulative effect of change in accounting principle, net of tax 8 - -
- -------------------------------------------------------------------------------------------------------
Net earnings $ 21 367 $ 347
=======================================================================================================
Per share of common stock
Basic earnings from continuing operations $ 0.51 $ 5.24 $ 4.61
Loss from discontinued operations, net of tax (0.32) - -
Cumulative effect of change in accounting principle, net of tax 0.12 - -
- -------------------------------------------------------------------------------------------------------
Basic net earnings $ 0.31 $ 5.24 $ 4.61
=======================================================================================================
Diluted earnings from continuing operations $ 0.50 $ 5.20 $ 4.56
Loss from discontinued operations, net of tax (0.31) - -
Cumulative effect of change in accounting principle, net of tax 0.12 - -
- -------------------------------------------------------------------------------------------------------
Diluted net earnings $ 0.31 $ 5.20 $ 4.56
=======================================================================================================
Dividends $ 1.36 $ 1.36 $ 1.36
Weighted-average shares outstanding (millions)
Basic 66.7 70.2 75.2
Diluted 68.0 70.6 76.0
- -------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 (millions of dollars) 2001 2000
- -------------------------------------------------------------------------------
ASSETS
Current assets
<S> <C> <C>
Cash and equivalents $ 316 $ 114
Trade receivables, less allowances (2001: $93; 2000: $103) 1,515 1,748
Inventories 1,110 1,119
Prepaid expenses and other 59 54
Deferred income taxes 176 50
Other current assets 135 152
- -------------------------------------------------------------------------------
Total Current Assets 3,311 3,237
===============================================================================
Other assets
Investment in affiliated companies 117 113
Intangibles, net 703 762
Deferred income taxes 354 253
Prepaid pension costs 208 141
Other assets 222 262
- --------------------------------------------------------------------------------
1,604 1,531
===============================================================================
Property, plant and equipment
Land 56 64
Buildings 886 838
Machinery and equipment 4,372 4,374
Accumulated depreciation (3,262) (3,142)
- -------------------------------------------------------------------------------
2,052 2,134
- -------------------------------------------------------------------------------
Total Assets $ 6,967 $ 6,902
===============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31 (millions of dollars) 2001 2000
- -------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 148 $ 961
Accounts payable 1,427 1,257
Employee compensation 252 256
Deferred income taxes 102 103
Accrued expenses 623 590
Restructuring costs 77 5
Accrued product recalls 239 -
Other current liabilities 195 102
Current maturities of long-term debt 19 29
- -------------------------------------------------------------------------------
Total Current Liabilities 3,082 3,303
- -------------------------------------------------------------------------------
Other liabilities
Deferred income taxes 177 175
Postemployment benefits 623 630
Product warranty 45 48
Other liabilities 160 120
Long-term debt 1,295 795
- -------------------------------------------------------------------------------
2,300 1,768
- -------------------------------------------------------------------------------
Minority interests 127 147
Stockholders' equity
Common stock, $1 par value: 250 million shares authorized 86 84
Paid-in capital 480 393
Retained earnings 2,470 2,539
Unearned restricted stock - (11)
Accumulated other comprehensive income (697) (495)
Treasury stock--18 million shares at cost (881) (826)
===============================================================================
Total Stockholders' Equity 1,458 1,684
===============================================================================
Total Liabilities and Stockholders' Equity $ 6,967 $ 6,902
===============================================================================
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31 (millions of dollars) 2001 2000 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net earnings $ 21 $ 367 $ 347
Product recall (provision $295; cash paid $56) 239 - -
Restructuring charges, net of cash paid 74 (43) (73)
Loss on disposition of assets 33 15 15
Loss on discontinued operations 21 - -
Taxes deferred and payable, net (129) 11 15
Depreciation and amortization 396 400 417
Changes in assets and liabilities:
Trade receivables 116 (348) (41)
Inventories (26) (80) (52)
Accounts payable 230 221 106
Other, net 49 (98) 67
- --------------------------------------------------------------------------------------------------------
Cash Provided by Operating Activities $ 1,024 $ 445 $ 801
- --------------------------------------------------------------------------------------------------------
Investing activities
Net additions to properties $ (378) $ (375) $ (437)
Acquisitions of businesses, less cash acquired - (283) -
Proceeds of cross-currency interest rate swaps 209 - -
- --------------------------------------------------------------------------------------------------------
Cash (Used for) Investing Activities $ (169) $ (658) $ (437)
- --------------------------------------------------------------------------------------------------------
Financing activities
Proceeds of short-term borrowings $ 25,608 $ 29,506 $ 15,479
Repayments of short-term borrowings (26,398) (28,878) (15,841)
Proceeds of long-term debt 301 326 152
Repayments of long-term debt (80) (408) (175)
Dividends paid (113) (70) (103)
Purchase of treasury stock (43) (427) (167)
Other 72 27 59
- --------------------------------------------------------------------------------------------------------
Cash Provided by (Used for) Financing Activities $ (653) $ 76 $ (596)
- --------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Equivalents $ - $ (10) $ (143)
- --------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Equivalents $ 202 $ (147) $ (375)
Cash and Equivalents at Beginning of Year $ 114 $ 261 $ 636
- --------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 316 $ 114 $ 261
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Treasury Accumulated
Stock/ Other
Common Paid-In Comprehensive Retained
(millions of dollars) Stock Capital Income Earnings Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1999 $ 83 $ 77 $ (183) $ 2,024 $ 2,001
Comprehensive income
Net earnings 347 347
Other, principally foreign currency items, net of tax of $40 (260) (260)
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 87
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock repurchased (167) (167)
Common stock issued 1 48 49
Dividends declared on common stock (103) (103)
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1999 $ 84 $ (42) $ (443) $ 2,268 $ 1,867
==================================================================================================================================
Comprehensive income
Net earnings 367 367
Other, principally foreign currency items, net of tax of $19 (52) (52)
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 315
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock repurchased (427) (427)
Common stock issued 25 25
Dividends declared on common stock (96) (96)
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 2000 $ 84 $ (444) $ (495) $ 2,539 $ 1,684
==================================================================================================================================
Comprehensive income
Net earnings 21 21
Cumulative effect of change in accounting principle, net of tax of $7 (11) (11)
Unrealized gain on derivative instruments, net of tax of $2 (6) (6)
Other, principally foreign currency items, net of tax of $3 (185) (185)
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss (181)
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock repurchased (43) (43)
Common stock issued 2 86 88
Dividends declared on common stock (90) (90)
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 2001 $ 86 $ (401) $ (697) $ 2,470 $ 1,458
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements
<PAGE>
Notes to Consolidated Financial Statements
01 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
NATURE OF OPERATIONS
Whirlpool Corporation is the world's leading manufacturer and marketer of major
home appliances. The company manufactures in 13 countries under 11 major brand
names and markets products to distributors and retailers in more than 170
countries.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all majority-owned subsidiaries.
Investments in affiliated companies, consisting principally of a 49% direct
voting interest in a Mexican company (Vitromatic, S.A. de C.V.) and direct
voting interests ranging from 20% to 40% in several other international
companies, principally engaged in the manufacture and sale of major home
appliances or related component parts, are accounted for by the equity method.
All intercompany transactions have been eliminated upon consolidation.
USE OF ESTIMATES
Management is required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
REVENUE RECOGNITION
Sales are recorded when title passes to distributors or directly to retailers.
FREIGHT AND WAREHOUSING COSTS
Freight-out and warehousing costs are included in selling, general and
administrative expenses in the statements of earnings and were $497 million,
$470 million and $430 million in 2001, 2000 and 1999.
CASH AND EQUIVALENTS
All highly liquid debt instruments purchased with a maturity of three months or
less are considered cash equivalents.
INVENTORIES
Inventories are stated at first-in, first-out (FIFO) cost, except U.S.
production inventories, which are stated at last-in, first-out (LIFO) cost and
Brazilian inventories, which are stated at average cost. Costs do not exceed
realizable values.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is computed using the straight-line method based on the estimated
useful lives of the assets. Assets recorded under capital leases are included in
property, plant and equipment.
INTANGIBLES
The cost of business acquisitions in excess of net assets acquired was amortized
on a straight-line basis principally over 40 years. Non-compete agreements are
amortized on a straight-line basis over the terms of the agreements. Accumulated
amortization totaled $309 million and $295 million at December 31, 2001 and
2000. As circumstances indicated the potential impairment of goodwill, the
company compares the carrying amount against related estimated undiscounted
future cash flows to determine if a write-down to market value or discounted
cash flow value is required.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred. Such costs
were $231 million, $254 million and $210 million in 2001, 2000 and 1999.
ADVERTISING COSTS
Advertising costs are charged to expense as incurred. Such costs were $177
million, $191 million and $164 million in 2001, 2000 and 1999.
<PAGE>
FOREIGN CURRENCY TRANSLATION
The functional currency for the company's international subsidiaries and
affiliates is the local currency.
DERIVATIVE FINANCIAL INSTRUMENTS
On January 1, 2001, the Company adopted Financial Accounting Standards Board
Statement (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended. The adoption of Statement No. 133 resulted in a
cumulative effect of an accounting change of $8 million of income, net of tax,
in the company's statement of earnings and an $11 million decrease, net of tax,
in stockholders' equity. As a result of the adoption of Statement 133, the
company recognizes all of its derivative instruments as either assets or
liabilities in the balance sheet at fair value. The accounting for changes in
the fair value (i.e., gains or losses) of a derivative instrument depends on
whether it has been designated and qualifies as part of a hedging relationship
and further, on the type of hedging relationship. For those derivative
instruments that are designated and qualify as hedging instruments, the company
must designate the hedging instrument, based upon the exposure being hedged, as
a cash flow hedge, fair value hedge, or a hedge of a net investment in a foreign
operation.
For derivative instruments that are designated and qualify as a cash flow hedge
(i.e., hedging the exposure to variability in expected future cash flows that is
attributable to a particular risk), the effective portion of the unrealized gain
or loss on the derivative instrument is reported as a component of accumulated
other comprehensive income and reclassified into earnings in the same line item
associated with the hedged transaction in the same period or periods during
which the hedged transaction affects earnings. The ineffective portion of the
unrealized gain or loss on the derivative instrument, if any, is recognized in
other income (expense) in current earnings during the period of change. For
derivative instruments that are designated and qualify as a fair value hedge
(i.e., hedging the exposure to changes in the fair value of an asset or a
liability or an identified portion thereof that is attributable to a particular
risk), the gain or loss on the derivative instrument as well as the offsetting
loss or gain on the hedged item attributable to the hedged risk are recognized
in the same line item associated with the hedged item in current earnings during
the period of the change in fair values. For derivative instruments that are
designated and qualify as a hedge of a net investment in a foreign operation,
the unrealized gain or loss is reported in accumulated other comprehensive
income as part of the cumulative translation adjustment to the extent it is
effective. Any ineffective portions of net investment hedges are recognized in
other income (expense) in current earnings during the period of change. For
derivative instruments not designated as hedging instruments, the unrealized
gain or loss is recognized in other income (expense) in current earnings during
the period of change.
Prior to the adoption of SFAS No. 133, the interest component of domestic
interest rate swaps, which overlay a portion of the company's interest payments
on outstanding debt, was not carried at fair value in the financial statements.
The interest differential paid or received was recognized as an adjustment to
interest expense. Gains and losses on the interest component of terminated swaps
were deferred in noncurrent liabilities and amortized as an adjustment to
interest expense over the remaining term of the original
<PAGE>
swap. In the event of early extinguishment of debt, any realized or
unrealized gains or losses from related swaps were recognized in income
concurrent with the extinguishment.
The company also uses foreign currency forward contracts to hedge payments due
on cross currency interest rate swaps and intercompany loans and, along with
foreign currency options, to hedge material purchases, intercompany shipments
and other commitments. In addition, the company hedges a portion of its
contractual requirements of certain commodities with commodity futures
contracts. These contracts were not carried at fair value in the financial
statements prior to the adoption of SFAS No. 133 as the related gains and losses
were recognized in the same period and classified in the same manner as the
underlying transactions. Any gains and losses on terminated contracts were
deferred in current liabilities until the underlying transactions occurred.
NET EARNINGS PER COMMON SHARE
Diluted net earnings per share of common stock includes the dilutive effect of
stock and put options and stock based compensation plans.
02 NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and No. 142, "Goodwill and Other Intangible Assets."
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS No. 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets arising from business combinations completed after June 30,
2001. Under SFAS No. 142, goodwill and indefinite lived intangible assets will
no longer be amortized but will be reviewed at least annually for impairment.
Intangible assets that are not deemed to have an indefinite life will continue
to be amortized over their useful lives. The non-amortization provisions of SFAS
No. 142 apply to goodwill and intangible assets acquired after June 30, 2001.
With respect to goodwill and intangible assets acquired prior to July 1, 2001,
the company will apply the new accounting rules beginning January 1, 2002.
Application of the non-amortization provisions of SFAS No. 142 is expected to
result in an increase in net earnings of approximately $23 million in 2002. The
company will test goodwill for impairment using the two-step process described
in SFAS No. 142. The first step is to screen for potential impairment, while the
second step measures the amount of impairment, if any. The company expects to
perform the first of the required impairment tests of goodwill and indefinite
lived intangible assets, which will be calculated based on the December 31, 2001
carrying values, during the first quarter of 2002. Any impairment charge
resulting from these transitional impairment tests will be reflected as a
cumulative effect of a change in accounting principle. The company has not yet
determined the financial impact that the impairment provisions of SFAS No. 142
will have on its earnings or its consolidated financial position.
03 BUSINESS ACQUISITIONS
On January 7, 2000, the company completed its tender offer for the outstanding
publicly traded shares in Brazil of its subsidiaries Brasmotor S.A. (Brasmotor)
and Multibras S.A. Eletrodomesticos (Multibras). In completing the offer, the
company purchased additional shares of Brasmotor and Multibras for $283 million
bringing its equity interest in these companies to approximately 94%. Including
Embraco, the company's equity interest in its Brazilian subsidiaries increased
from approximately 55% to approximately
<PAGE>
87%. If this increase in ownership had been made on January 1, 1999, proforma
net earnings for 1999 would have been approximately $311 million.
04 DISCONTINUED OPERATIONS
In 1997, the company discontinued its financing operations, Whirlpool Financial
Corporation (WFC), and sold the majority of its assets. The remaining assets
consist primarily of an investment in a portfolio of leveraged leases which are
recorded in other non-current assets in the balance sheets and totaled $123
million and $124 million at December 31, 2001 and 2000, respectively.
During the second quarter of 2001, the company wrote off WFC's investment in a
securitized aircraft lease portfolio. The write-off, due primarily to the
softening aircraft leasing industry, resulted in a pre-tax loss from
discontinued operations of $35 million ($21 million after-tax).
05 INVENTORIES
December 31 (millions of dollars) 2001 2000
- -------------------------------------------------------------------------------
Finished products $ 949 $ 956
Work in process 58 57
Raw materials 239 257
- -------------------------------------------------------------------------------
1,246 1,270
Less excess of FIFO cost over LIFO cost 136 151
- -------------------------------------------------------------------------------
Total inventories $ 1,110 $ 1,119
===============================================================================
LIFO inventories represent approximately 39% and 33% of total inventories at
December 31, 2001 and 2000.
06 FINANCING ARRANGEMENTS
On June 1, 2001, the company entered into an $800 million five-year committed
credit agreement and a committed $400 million 364-day credit agreement
(collectively the "Credit Agreement") with a group of banks. The company pays a
commitment fee on the Credit Agreement. The Credit Agreement exists largely to
support the issuance of commercial paper and other short-term borrowings, and is
available for general corporate purposes. The interest rate for borrowing under
the Credit Agreement is principally based on the London Interbank Offered Rate
plus a spread that reflects the company's debt rating. The provisions of the
Credit Agreement require that the company maintain certain financial ratios. At
December 31, 2001, the company was in compliance with all financial covenants.
At December 31, 2001, there were no borrowings outstanding under the Credit
Agreement.
Short-term notes payable consist of the following:
December 31 (millions of dollars) 2001 2000
- -------------------------------------------------------------------------------
Payable to banks $ 139 $ 414
Commercial paper 9 526
Other - 21
- -------------------------------------------------------------------------------
Total notes payable $ 148 $ 961
===============================================================================
The weighted average interest rate on notes payable was 7.6% and 8.1% at
December 31, 2001 and 2000.
<PAGE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Interest
December 31 (millions of dollars) Maturity Rate 2001 2000
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debentures 2008 and 2016 7.8 and 9.1% $ 368 $ 368
Senior notes 2003 to 2010 5.9 to 9.0 789 525
Other 2002 to 2012 2.6 to 9.1 157 152
- -----------------------------------------------------------------------------------------
1,314 1,045
- -----------------------------------------------------------------------------------------
Less cross currency interest rate swap adjustments - 221
Less current maturities 19 29
- -----------------------------------------------------------------------------------------
Total long-term debt, net $ 1,295 $ 795
=========================================================================================
</TABLE>
See Note 7 for a discussion of the cross currency interest rate swaps in the
above table.
Annual maturities of long-term debt in the next five years, are $19 million,
$212 million, $14 million, $6 million and $318 million.
The company paid interest on short-term and long-term debt totaling $151
million, $181 million and $151 million in 2001, 2000 and 1999.
The fair value of the company's short-term notes payable approximates the
carrying amount due to the short maturity of these obligations. The fair value
of the company's long-term debt (including current maturities) was approximately
$1,348 million and $1,108 million as of December 31, 2001 and 2000. The fair
values were estimated using discounted cash flow analyses based on incremental
borrowing rates for similar types of borrowing arrangements. The WFC preferred
stock carrying amount (see below) approximates fair value.
WFC had preferred stock outstanding as of December 31, 2001 and 2000, which is
included within minority interests in the consolidated balance sheets, as
follows:
<TABLE>
<CAPTION>
Mandatory
Number Face Annual Redemption Date of
of Shares Value Dividend Date Issuance
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Series B 350,000 $ 100 $ 6.55 9/1/2008 8/31/1993
Series C 250,000 $ 100 $ 6.09 2/1/2002 12/27/1996
- ------------------------------------------------------------------------------------------------
</TABLE>
The preferred stockholders are entitled to vote together on a share-for-share
basis with WFC's common stockholder, Whirlpool Corporation. Preferred stock
dividends are payable quarterly. At its option, WFC may redeem the Series B at
any time on or after September 1, 2003. The redemption price is $100 per share
plus any accrued unpaid dividends and the applicable redemption premium if
redeemed early. Commencing September 1, 2003, WFC must pay $1.8 million per year
into a sinking fund for the benefit of the Series B preferred stockholders, with
a final payment of $26.3 million due on or before September 1, 2008. The Series
C preferred stock was redeemed on February 1, 2002.
The company and WFC are parties to a support agreement. Pursuant to the
agreement, if at the close of any quarter WFC's net earnings available for fixed
charges (as defined) for the preceding twelve months is less than a stipulated
amount, the company is required to make a cash payment to WFC equal to the
insufficiency within 60 days of the end of the quarter. The company did not make
any payments under this agreement during 2001,
<PAGE>
2000 or 1999. The support agreement may be terminated by either WFC or the
company upon 30 days notice provided that certain conditions are met. The
company has also agreed to maintain ownership of at least 70% of WFC's voting
stock.
07 DERIVATIVE FINANCIAL INSTRUMENTS
The company is exposed to market risk from changes in foreign currency exchange
rates, domestic and foreign interest rates, and commodity prices, which can
affect its operating results and overall financial condition. The company
manages its exposure to these market risks through its operating and financing
activities and, when deemed appropriate, through the use of derivative financial
instruments. The company deals only with investment-grade counterparties to
these contracts and monitors its overall credit risk and exposure to individual
counterparties. The company does not anticipate nonperformance by any
counterparties. The amount of the exposure is generally the unrealized gains in
such contracts. The company does not require, nor does it post, collateral or
security on such contracts. The company does not enter into derivative financial
instruments for trading purposes.
The company has entered into foreign currency forward exchange contracts with
maturities of up to eighteen months in order to manage exposures related to
forecasted foreign currency denominated expenditures and certain intercompany
financing and royalty agreements. The company also used commodity futures
contracts (principally copper and aluminum) with remaining maturities up to 12
months to hedge the price risk on a portion of raw material purchases used in
the manufacturing process. Foreign currency forward exchange contracts and
commodity futures contracts that have been designated and are effective as
hedges of firm commitments or anticipated transactions are treated as cash flow
hedges for accounting purposes. The notional amount of outstanding foreign
currency forward contracts was $922 million and $645 million as of December 31,
2001 and 2000, respectively. The notional amount of outstanding commodity
futures contracts was $14 million and $20 million as of December 31, 2001 and
2000, respectively. Unrealized gains and losses on the above foreign currency
exchange contracts and commodities futures contracts were not significant as of
December 31, 2001 and December 31, 2000, respectively.
The company has designated a portion of its euro-denominated fixed-rate debt as
a hedge of its investments in its European subsidiaries. Translation adjustments
related to this portion of the debt are not included in the income statement,
but are shown in the cumulative translation adjustment account included in
accumulated other comprehensive income. During the year ended December 31, 2001,
the company recognized $2 million of unrealized losses included in the
cumulative translation adjustment related to this net investment hedge.
The company is party to a $100 million interest rate swap agreement that
effectively converts a portion of its floating-rate obligations to a fixed-rate
basis for the next five years, thus reducing the impact of interest-rate changes
on future interest expense. This contract is designated and is effective as a
hedge of future cash payments and is treated as a cash flow hedge for accounting
purposes. The fair value of this contract was a loss of $4 million as of
December 31, 2001.
In September 2000, the company entered into additional domestic interest rate
swaps that neutralized any potential interest rate impact from an existing
portfolio of domestic interest rate swaps. These contracts are not designated as
hedges and are therefore marked-to-market each period through earnings as a
component of interest expense with
<PAGE>
unrealized gains (losses) on the September 2000 swap contracts offsetting
subsequent unrealized (losses) gains on the original swap portfolio.
The company managed a portfolio of domestic and cross currency interest rate
swaps that effectively converted U.S. dollar denominated debt into that of
various European currencies. Through May 15, 2000, such local currency
denominated debt served as an effective hedge against the company's European
cash flows and net assets. On May 15, 2000, the company undesignated these
contracts as hedges of the net investment in its European operations and
entered into offsetting euro denominated currency swaps, effectively locking
in its positive cash position on the original swap portfolio. These contracts
were not designated as hedges and therefore were marked-to-market each period
through earnings as a component of interest expense with unrealized gains
(losses) on the May 2000 swap contracts substantially offsetting subsequent
unrealized (losses) gains on the original swap portfolio. On October 5, 2001,
the company sold its position in the above-referenced swaps for approximately
$209 million.
During the year ended December 31, 2001, the company's gains and losses related
to the ineffective portion of its hedging instruments were immaterial. The
company did not recognize any gains or losses during the year ended December 31,
2001 for cash flow hedges that were discontinued because the forecasted
transaction was no longer probable of occurring. The amount of unrealized gains
and losses on derivative instruments included in accumulated other comprehensive
income at December 31, 2001 that will be reclassified into earnings during 2002
is not significant. The net transaction losses recognized in other income
(expense), including gains and losses from those contracts not designated as
hedges, was $11 million in 2001, $17 million in 2000 and $201 million in 1999
due primarily to the Brazilian currency devaluation.
08 STOCKHOLDERS' EQUITY
On February 15, 2000, the company announced that its Board of Directors approved
an extension of the company's stock repurchase program to $1 billion. The
additional $750 million share repurchase authorization extends the previously
authorized $250 million repurchase program that was announced March 1, 1999. The
shares are to be purchased in the open market and through privately negotiated
sales as the company deems appropriate. The company has purchased 12.0 million
shares at a cost of $637 million through December 31, 2001 under this stock
repurchase program, of which 2.6 million shares ($167 million) were purchased in
1999, 8.7 million shares ($427 million) were purchased in 2000, and 0.7 million
shares ($43 million) were purchased in 2001. The 2001 share repurchases included
0.6 million shares that were purchased from one of the company's U.S. pension
plans at a cost of $41 million. The shares repurchased from the pension plan
were at an average cost of $67.78 per share, which was based upon an average of
the high and low market prices on the date of purchase.
In addition to its common stock, the company has 10 million authorized shares of
preferred stock (par value $1 per share), none of which is outstanding.
Consolidated retained earnings at December 31, 2001 included $15 million of
equity in undistributed net earnings of affiliated companies.
The cumulative translation component of stockholders' equity represents the
effect of translating net assets of the company's international subsidiaries
offset by related hedging activity, net of tax, and is included as a component
of accumulated other comprehensive income on the Statements of Changes in
Stockholders' Equity. The balances of foreign
<PAGE>
currency translation decreased total stockholders' equity by $443 million, $495
million and $680 million at December 31, 1999, 2000 and 2001, respectively.
Stock option transactions, restricted stock grants and put options account for
the changes in paid-in capital.
Preferred Stock Purchase Rights
One Preferred Stock Purchase Right (Rights) is outstanding for each share of
common stock. The Rights, which expire May 22, 2008, will become exercisable 10
days after a person or group (an Acquiring Person) has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding common
stock (the Trigger Date) or 10 business days after the commencement, or public
disclosure of an intention to commence, a tender offer or exchange offer by a
person that could result in beneficial ownership of 15% or more of the
outstanding common stock. Each Right entitles the holder to purchase from the
company one one-thousandth of a share of a Junior Participating Preferred Stock,
Series B, par value $1.00 per share, of the company at a price of $300 per one
one-thousandth of a Preferred Share subject to adjustment.
If a person becomes an Acquiring Person, proper provision shall be made so that
each holder of a Right, other than Rights that are or were beneficially owned by
the Acquiring Person (which will thereafter be void), shall thereafter have the
right to receive upon exercise of such Right that number of shares of common
stock (or other securities) having at the time of such transaction a market
value of two times the exercise price of the Right. If a person becomes an
Acquiring Person and the company is involved in a merger or other business
combination transaction where the company is not the surviving corporation or
where common stock is changed or exchanged or in a transaction or transactions
in which 50% or more of its consolidated assets or earning power are sold,
proper provision shall be made so that each holder of a Right (other than such
Acquiring Person) shall thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Right, that number of shares
of common stock of the acquiring company which at the time of such transaction
would have a market value of two times the exercise price of the Right. In
addition, if an Acquiring Person does not have beneficial ownership of 50% or
more of the common stock, the company's Board of Directors has the option of
exchanging all or part of the Rights for an equal number of shares of common
stock in the manner described in the Rights Agreement.
Prior to the Trigger Date, the Board of Directors of the company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable in cash,
shares of common stock or any other consideration deemed appropriate by the
Board of Directors. Immediately upon action of the Board of Directors ordering
redemption of the Rights, the ability of holders to exercise the Rights will
terminate and such holders will only be able to receive the redemption price.
Until such time as the Rights become exercisable, the Rights have no voting or
dividend privileges and are attached to, and do not trade separately from, the
common stock.
The company covenants and agrees that it will cause to be reserved and kept
available at all times a sufficient number of shares of Preferred Stock
(and following the occurrence of a Triggering Event, shares of common stock
and/or other securities) to permit the exercise in full of all Rights from
time to time outstanding.
<PAGE>
09 STOCK OPTION AND INCENTIVE PLANS
Stock option and incentive plans are accounted for in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Generally, no compensation expense is recognized for
stock options with exercise prices equal to the market value of the underlying
shares of stock at the date of grant. Stock options generally have 10 year
terms, and vest and become fully exercisable over a two year period after date
of grant. Compensation expense related to the company's stock and incentive
plans is recognized ratably over each plan's defined vesting period. Expenses
under these incentive plans were $26 million, $1 million and $8 million in 2001,
2000 and 1999.
The company's stock option and incentive plans permit the grant of stock options
and other stock awards covering up to 14.2 million shares to key employees of
the company and its subsidiaries, of which 3.7 million shares are available for
grant at December 31, 2001. Outstanding restricted and phantom shares totaled
1,060,000 with a weighted-average grant-date fair value of $55.35 per share at
December 31, 2001 and 770,000 with a weighted-average grant-date fair value of
$50.35 per share at December 31, 2000.
Under the Nonemployee Director Stock Ownership Plan, each nonemployee director
is automatically granted 400 shares of common stock annually and is eligible
for a stock option grant of 600 shares if the company's earnings meet a
prescribed earnings formula. In addition, each nonemployee director is awarded
annually deferred compensation in the form of 400 shares of phantom stock,
which is converted into common stock on a one-for-one basis and paid when the
director leaves the Board. This plan provides for the grant of up to 300,000
shares as either stock or stock options, of which 169,000 shares were available
for grant at December 31, 2001. The stock options vest and become exercisable
six months after date of grant. There were no significant expenses under this
plan for 2001, 2000 or 1999.
Had the company elected to adopt the recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," under which stock options are
accounted for at estimated fair value, proforma net earnings and diluted net
earnings per share would be as follows:
<TABLE>
<CAPTION>
December 31 (millions of dollars, except per share data) 2001 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings
As reported $ 21 $ 367 $ 347
Proforma 8 355 338
- ---------------------------------------------------------------------------------------------
Diluted net earnings per share
As reported $ 0.31 $ 5.20 $ 4.56
Proforma 0.12 5.03 4.44
- ---------------------------------------------------------------------------------------------
</TABLE>
The fair value of stock options used to compute proforma net earnings and
diluted net earnings per share disclosures is the estimated present value at
grant date using the Black-Scholes option-pricing model with the following
assumptions for 2001, 2000 and 1999: expected volatility factor of .326, .286
and .255; dividend yield of 2.3%, 2.7% and 2.2%; risk-free interest rate of
4.3%, 5.1% and 6.4% and a weighted-average expected option life of 5 years for
all three years.
<PAGE>
A summary of stock option information follows:
<TABLE>
<CAPTION>
2001 2000 1999
--------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Number Exercise Number Exercise Number Exercise
(thousands of shares, except per share data) of Shares Price of Shares Price of Shares Price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 6,437 $ 50.86 4,605 $ 52.21 4,120 $ 50.59
Granted 1,401 54.30 2,222 47.59 1,629 53.19
Exercised (1,508) 50.19 (190) 42.23 (960) 46.35
Canceled or expired (264) 50.49 (200) 53.83 (184) 55.30
- ----------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31 6,066 $ 51.83 6,437 $ 50.86 4,605 $ 52.21
============================================================================================================================
Exercisable at December 31 3,574 $ 52.68 3,545 $ 52.44 2,611 $ 50.14
============================================================================================================================
Fair value of options granted during the year $ 15.59 $ 12.23 $ 14.59
============================================================================================================================
</TABLE>
Of the outstanding options at December 31, 2001, 3.5 million options, of which
2.3 million are exercisable at a weighted-average price of $49.34, have exercise
prices ranging from $34.94 to $52.47 and a weighted-average remaining life of
7.2 years. The remaining 2.6 million outstanding options, of which 1.2 million
are exercisable at a weighted-average price of $59.07, have exercise prices
ranging from $53.06 to $72.34 and a weighted-average remaining life of 7.2
years.
10 RESTRUCTURING AND RELATED CHARGES
Restructuring
Through December 31, 2001, the company approved and implemented various phases
of the restructuring program that resulted in pre-tax restructuring charges of
$150 million, which have been identified as a separate component of operating
profit. The restructuring charges included $134 million in termination benefits
and $16 million in non-employee exit costs related primarily to the closing of a
refrigeration plant in the company's Latin American region, a parts packing
facility in the North American region, a plastic components facility in the
Asian region and a restructuring of the company's microwave business in its
European region. The majority of employees terminated to date represent hourly
personnel at the identified facilities. For the initiatives announced through
December 31, 2001, the company expects to eliminate approximately 5,000
employees of which 3,700 had left the company through December 31, 2001. The
reduction in positions due to restructuring has been partially offset by an
increase in the number of employees in other areas of the company.
Related Charges
As a result of the company's restructuring activity to date, $62 million pre-tax
of restructuring related charges have also been recorded primarily within cost
of products sold. Included in this total is $12 million in write-downs of
various fixed assets, primarily buildings that are no longer used in the
company's business activities in its Latin American region, $7 million of excess
inventory due to the parts distribution
<PAGE>
consolidation in North America, and $25 million in various assets in its North
American, European and Asian regions which was primarily made up of equipment no
longer used in its business. There was also $18 million in cash costs incurred
during the year for various restructuring related activities such as relocating
employees and equipment and concurrent operating costs. Details of the
restructuring liability balance and full year restructuring and related activity
for 2001 are as follows:
<TABLE>
<CAPTION>
Beginning Charge Ending
(millions of dollars) Balance to Earnings Cash Paid Non-cash Translation Balance
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Restructuring
Termination costs $ 5 $ 134 $ (64) $ - $ - $ 75
Non-employee exit costs 16 (12) - - 4
Translation impact - - - - (2) (2)
- --------------------------------------------------------------------------------------------------
Related charges
Miscellaneous buildings - 12 - (12) - -
Inventory - 7 - (7) - -
Miscellaneous equipment - 25 - (25) - -
Various cash costs - 18 (18) - - -
- --------------------------------------------------------------------------------------------------
Total $ 5 $ 212 $ (94) $ (44) $ (2) $ 77
==================================================================================================
</TABLE>
11 PRODUCT RECALLS
On October 16, 2001, in cooperation with the Consumer Products Safety Commission
(CPSC), the company announced a voluntary recall of 1.8 million microwave hood
combination units sold under the Whirlpool, KitchenAid, and Sears Kenmore
brands. During the third quarter, the company identified and investigated a
potential safety issue relating to the units and on September 24, 2001 notified
the CPSC of the issue based on the company's initial investigation. The company
recognized an estimated product recall pre-tax charge of $300 million ($184
million after-tax) during the third quarter and recorded this charge as a
separate component of operating profit. During the fourth quarter, this
liability was reduced by $79 million ($48 million after-tax) due to the
development of a more efficient service repair procedure, which enables less
costly and more timely repairs and substantially reduces the frequency of more
expensive alternatives. Management believes the remaining $165 million
liability, which is net of $56 million in cash costs paid through year-end,
represents its best current estimate of the remaining cost of the recall;
however, due to the various judgments and estimates involved, actual results
could differ from this estimate. The remaining projected $80 million after-tax
cash cost of the recall is expected to be realized over the next several
quarters.
On January 31, 2002, in cooperation with the CPSC, the company announced a
voluntary recall of approximately 1.4 million dehumidifier units sold under the
Whirlpool, ComfortAire, and Sears Kenmore brands. During the fourth quarter, the
company identified and investigated a potential safety issue relating to the
units and on November 29, 2001, notified the CPSC of the issue based on the
company's initial investigation. The company recognized an estimated product
recall pre-tax charge of $74 million ($45 million after-tax) during the fourth
quarter of 2001 and recorded this charge as a separate
<PAGE>
component of operating profit. Management believes this represents its best
current estimate of the cost of the recall; however, due to the various
judgments and estimates involved, actual results could differ from this
estimate. The projected $45 million after-tax cash cost of the recall is
expected to be realized over the next several quarters.
12 INCOME TAXES
Income tax provisions from continuing operations are as follows:
Year ended December 31 (millions of dollars) 2001 2000 1999
- ---------------------------------------------------------------------
Current
Federal $ 201 $ 149 $ 148
State and local 14 14 25
Foreign 34 34 52
- ---------------------------------------------------------------------
249 197 225
Deferred
Federal (121) 26 (2)
State and local (21) 3 -
Foreign (64) (26) (26)
- ---------------------------------------------------------------------
(206) 3 (28)
- ---------------------------------------------------------------------
Total income tax provision $ 43 $ 200 $ 197
=====================================================================
Domestic and foreign earnings (loss) from continuing operations before income
taxes and other items are as follows:
Year ended December 31 (millions of dollars) 2001 2000 1999
- ---------------------------------------------------------------------
Domestic $ 204 $ 479 $ 524
Foreign (111) 98 (10)
- ---------------------------------------------------------------------
Total earnings before taxes and other items $ 93 $ 577 $ 514
=====================================================================
Earnings before income taxes and other items, including discontinued operations
(refer to Note 4), were $58 million, $577 million and $514 million for 2001,
2000 and 1999, respectively.
Reconciliations between the U.S. federal statutory income tax rate and the
consolidated effective income tax rate for earnings before income taxes and
other items from continuing operations are as follows:
<PAGE>
Year ended December 31 (millions of dollars) 2001 2000 1999
- ------------------------------------------------------------------------------
U.S. federal statutory rate 35.0% 35.0% 35.0%
State and local taxes, net of federal tax benefit 6.5 2.7 5.5
Nondeductible goodwill amortization 6.6 1.0 1.6
Foreign tax rate differential 0.8 (1.5) (1.1)
Recognition of benefits for foreign net operating losses - (0.6) (1.7)
Foreign dividends and subpart F income 14.4 2.3 2.8
Foreign government tax incentive (24.1) (3.7) (0.2)
Foreign tax credits (9.7) (1.7) (1.0)
Unbenefited operating losses 17.7 0.9 2.1
Permanent differences 2.6 0.5 (6.3)
Deductible interest on foreign capital (19.6) - (0.7)
Nondeductible expenses 7.3 (0.2) 0.8
Foreign withholding taxes 6.7 0.8 0.4
Other items 1.6 (0.8) 1.0
- ------------------------------------------------------------------------------
Effective income tax rate 45.8% 34.7% 38.2%
==============================================================================
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities used for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the company's deferred tax liabilities and assets are
as follows:
December 31 (millions of dollars) 2001 2000
- ----------------------------------------------------------------------------
Deferred tax liabilities
Property, plant and equipment $ 115 $ 92
Financial services leveraged leases 120 122
Pensions 95 67
Software costs 21 26
Contested liabilities 22 23
Other 73 116
- ----------------------------------------------------------------------------
Total deferred tax liabilities 446 446
- ----------------------------------------------------------------------------
Deferred tax assets
Postretirement obligation 196 184
Restructuring costs 12 11
Product warranty accrual 19 25
Receivable and inventory allowances 35 62
Loss carryforwards 182 139
Product recall reserves 93 -
Employee compensation 45 45
Other 144 31
- ----------------------------------------------------------------------------
Total deferred tax assets 726 497
- ----------------------------------------------------------------------------
Valuation allowances for deferred tax assets (29) (26)
- ----------------------------------------------------------------------------
Deferred tax assets, net of valuation allowances 697 471
- ----------------------------------------------------------------------------
Net deferred tax assets $ 251 $ 25
============================================================================
The company has recorded valuation allowances to reflect the estimated amount of
net operating loss carryforwards and other deferred tax assets that may not be
realized. At December 31, 2001, the company has foreign net operating loss
carryforwards of $540 million, which are primarily nonexpiring.
The company provides deferred taxes on the undistributed earnings of foreign
subsidiaries and affiliates to the extent such earnings are expected to be
remitted. Generally, earnings have been remitted only when no significant net
tax liability would have been incurred. No provision has been made for U.S. or
foreign taxes that may result from future remittances of the undistributed
earnings ($469 million at December 31, 2001) of foreign subsidiaries and
affiliates expected to be reinvested indefinitely. Determination of the deferred
income tax liability on these unremitted earnings is not practicable as such
liability, if any, is dependent on circumstances existing when remittance
occurs.
<PAGE>
The company paid income taxes of $148 million in 2001, $262 million in 2000 and
$235 million in 1999.
13 PENSION AND POSTRETIREMENT MEDICAL BENEFITS PLANS
The company maintains both contributory and noncontributory defined benefit
pension plans covering substantially all North American and Brazilian employees
and certain European employees. Benefits are based primarily on service and
either compensation during a specified period before retirement or specified
amounts for each year of service. Assets held by the plans consist primarily of
listed common stocks and bonds, government securities, investments in trust
funds, bank deposits and other investments. As of December 31, 2001, the
company's U.S. pension plans held as investments approximately $123 million, or
1.7 million shares, of Whirlpool Corporation common stock. This investment
represented approximately 8% of the total market value of assets held by these
plans as of December 31, 2001.
Although the company's pension plans are overfunded on a combined basis by $143
million as of December 31, 2001, several of the plans do not hold or have
minimal assets and are therefore underfunded. The projected benefit obligation,
accumulated benefit obligation, and fair value of plan assets for the
underfunded pension plans were $197 million, $187 million and $109 million,
respectively, as of December 31, 2001, $83 million, $73 million and $6 million,
respectively, as of December 31, 2000, and $80 million, $71 million and $5
million, respectively, as of December 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
Pension Benefits
------------------------------------
(millions of dollars) 2001 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation as of January 1 $1,283 $1,242 $ 1,344
Service cost 61 48 50
Interest cost 101 101 98
Plan participants' contributions - - 1
Amendments 45 11 7
Actuarial (gain) loss 51 38 (114)
Settlements (36) - -
Benefits paid (76) (175) (93)
Curtailments (1) - -
Special termination benefits (3) 32 (2)
Foreign currency exchange rate changes (11) (14) (49)
- --------------------------------------------------------------------------------
Benefit obligation as of December 31 $1,414 $1,283 $ 1,242
================================================================================
Change in plan assets
Fair value of plan assets as of January 1 $1,941 $2,201 $ 1,672
Actual return on plan assets (269) (57) 644
Employer contributions 7 3 12
Settlements (36) - -
Plan participants' contributions 1 - 1
401 (h) transfer - (20) -
Benefits paid (76) (175) (93)
Foreign currency exchange rate changes (11) (11) (35)
- --------------------------------------------------------------------------------
Fair value of plan assets as of December 31 $1,557 $1,941 $ 2,201
================================================================================
Reconciliation of prepaid (accrued) cost
and total amount recognized
Funded status as of December 31 $ 143 $ 658 $ 959
Unrecognized actuarial (gain) (135) (702) (1,087)
Unrecognized prior service cost 121 80 73
Unrecognized transition asset 7 11 11
- --------------------------------------------------------------------------------
Prepaid (accrued) cost as of December 31 $ 136 $ 47 $ (44)
================================================================================
Prepaid cost at December 31 $ 224 $ 160 $ 85
Accrued benefit liability at December 31 (100) (123) (138)
Intangible asset - 1 2
Other 12 9 7
- --------------------------------------------------------------------------------
Total recognized as of December 31 $ 136 $ 47 $ (44)
================================================================================
Assumptions as of December 31
U.S. pension plans:
Discount rate 7.50% 8.00% 8.00%
Expected return on assets 10.00% 10.50% 9.00%
Rate of compensation increase 5.00% 5.00% 5.00%
Foreign pension plans:
Discount rate 5.0 - 11.3% 5.0 - 11.3% 5.0 - 11.3%
Expected return on assets 6.0 - 11.3% 6.0 - 11.3% 6.0 - 11.3%
Rate of compensation increase 2.5 - 8.2% 1.0 - 8.0% 2.5 - 8.0%
Components of net periodic benefit cost
Service cost $ 61 $ 48 $ 50
Interest cost 101 101 98
Expected return on plan assets (189) (178) (127)
Recognized actuarial (gain) (36) (39) (7)
Amortization of prior service cost 11 10 9
Amortization of transition asset - (1) (1)
- --------------------------------------------------------------------------------
Net periodic benefit cost (credit) (52) (59) 22
- --------------------------------------------------------------------------------
Curtailments (1) - -
Special termination benefits 3 32 (1)
Settlements (20) (71) -
- --------------------------------------------------------------------------------
Total cost (credit) $ (70) $ (98) $ 21
================================================================================
</TABLE>
The company accounts for its defined benefit pension plans in accordance with
SFAS No. 87, "Employers' Accounting for Pensions," which requires that amounts
recognized in financial statements be determined on an actuarial basis. A
substantial portion of the company's pension amounts relate to its defined
benefit plans in the United States. SFAS No. 87 and the policies used by the
company, notably the use of a calculated value of plan assets (which is further
described below), generally reduced the volatility of pension (credits) expense
from changes in pension liability discount rates and the performance of the
pension plan assets.
The most significant element in determining the company's pension (credits)
expense in accordance with SFAS No. 87 is the expected return on plan assets. At
December 31,
<PAGE>
2001, the company assumed that the expected long-term rate of return on U.S.
plan assets will be 10.0% which is down from the assumption of 10.5% at December
31, 2000. Over the past 10 years, the company's U.S. pension plan assets have
on average earned in excess of 10.0%; therefore, the company believes that its
assumption of future returns of 10.0% is reasonable. The assumed long-term rate
of return on assets is applied to a calculated value of plan assets, which
recognizes changes in the fair value of plan assets in a systematic manner over
five years. This produces the expected return on plan assets that is included in
pension (credits) expense. The difference between this expected return and the
actual return on plan assets is deferred. The net deferral of past asset gains
and losses affects the calculated value of plan assets and, ultimately, future
pension (credits) expense.
At the end of each year, the company determines the discount rate to be used to
discount plan liabilities. The discount rate reflects the current rate at which
the pension liabilities could be effectively settled at the end of the year. In
estimating this rate, the company looks to rates of return on high quality,
fixed-income investments that receive one of the two highest ratings given by a
recognized ratings agency. At December 31, 2001, the company determined this
rate to be 7.5% for the U.S. plans, a reduction from 2000 reflecting the
declining interest rate environment. Changes in discount rates over the past
three years have not materially affected pension (credits) expense, and the net
effect of changes in the discount rate, as well as the net effect of other
changes in actuarial assumptions and experience, have been deferred in
accordance with the amortization provision of SFAS No. 87.
The company also sponsors a defined benefit healthcare plan that provides
postretirement medical benefits to full time U.S. employees who have worked 10
years and attained age 55 while in service with the company. The Plan is
currently noncontributory and includes cost-sharing features such as
deductibles, coinsurance and a lifetime maximum. The company does not fund the
plan. No significant postretirement medical benefits are provided by the company
to non-U.S. employees.
Various actuarial assumptions are used, including the discount rate and the
expected trend in health care costs, to estimate the costs and benefit
obligations for the company's retiree health plan. The discount rate is
estimated looking at the rates of return on high quality, fixed income
investments that receive one of the two highest ratings given by a recognized
ratings agency. At December 31, 2001, the company assumed a discount rate of
7.5%, a reduction from 2000 reflecting the declining interest rate environment.
In addition, the decrease in the discount rate increased the company's retiree
health benefit liability by approximately $35 million at December 31, 2001. The
majority of the retiree health benefit liability increase has been deferred in
accordance with the amortization provisions of SFAS No. 106. At December 31,
2001, the company's assumed health care cost trend rate for 2002 was 8.5% to
10.5% depending on the employees age, or an increase of 2.5% to 4.5% over the
prior year. This increase was primarily due to the recent increases in the price
of medical services provided by the plan. The ultimate long-term trend rate was
assumed to decrease gradually to 6.0% by 2006 and remain at that level
thereafter.
<PAGE>
<TABLE>
<CAPTION>
Post Retirement Medical Benefits
-------------------------------------------
(millions of dollars) 2001 2000 1999
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation as of January 1 $ 439 $ 414 $ 428
Service cost 11 9 10
Interest cost 34 32 30
Amendments (43) - -
Actuarial (gain) loss 108 6 (34)
Benefits paid (24) (22) (20)
- ---------------------------------------------------------------------------------------------------------------------------
Benefit obligation as of December 31 $ 525 $ 439 $ 414
===========================================================================================================================
Change in plan assets
Fair value of plan assets as of January 1 $ - $ - $ -
Contributions 24 22 20
Benefits paid (24) (22) (20)
- ---------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets as of December 31 $ - $ - $ -
===========================================================================================================================
Reconciliation of prepaid (accrued) cost and total amount recognized
Funded status as of December 31 $ (525) $ (439) $ (414)
Unrecognized actuarial (gain) loss 87 (21) (27)
Unrecognized prior service cost (43) - -
- ---------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) cost as of December 31 $ (481) $ (460) $ (441)
- ---------------------------------------------------------------------------------------------------------------------------
Prepaid cost at December 31 $ - $ - $ -
Accrued benefit liability at December 31 (481) (460) (441)
- ---------------------------------------------------------------------------------------------------------------------------
Total recognized as of December 31 $ (481) $ (460) $ (441)
===========================================================================================================================
Assumptions as of December 31
Discount rate 7.50% 8.00% 8.00%
Medical costs trend rate
For year ending December 31 8. 5 - 10.5% 6.00% 7.00%
Ultimate medical trend rate (2006) 6.00%
- ---------------------------------------------------------------------------------------------------------------------------
Components of net periodic benefit cost
Service cost $ 11 $ 9 $ 10
Interest cost 34 32 30
- ---------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 45 $ 41 $ 40
===========================================================================================================================
</TABLE>
The medical cost trend significantly affects the reported postretirement benefit
cost and benefit obligations. A one-percentage-point change in the assumed
health care cost trend rate would have the following effects:
<TABLE>
<CAPTION>
One One
Percentage Percentage
Point Point
(millions of dollars) Increase Decrease
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total service cost and interest cost components $ 4 $ (4)
Effect on postretirement benefit obligation 37 (37)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The U.S. pension plans provide that in the event of a plan termination within
five years following a change in control of the company, any assets held by the
plans in excess of he amounts needed to fund accrued benefits would be used to
provide additional benefits to plan participants. A change in control generally
means either a change in the majority of the incumbent board of directors or an
acquisition of 25% or more of the voting power of the company's outstanding
stock, without the approval of a majority of the incumbent board.
<PAGE>
The company maintains a 401(k) defined contribution plan covering substantially
all U.S. employees. Company matching contributions for domestic hourly and
certain other employees under the plan, based on the company's annual operating
results and the level of individual participant's contributions, amounted to $12
million, $12 million and $9 million in 2001, 2000 and 1999.
14 CONTINGENCIES
The company is involved in various legal actions arising in the normal course of
business. Management, after taking into consideration legal counsel's evaluation
of such actions, is of the opinion that the outcome of these matters will not
have a material adverse effect on the company's financial position.
The company is a party to certain financial guarantees and standby letters of
credit with risk not reflected on the balance sheet. The only significant
arrangement in place at year-end is in its Brazilian subsidiary. As a standard
business practice the subsidiary guarantees customer lines of credit at
commercial banks following its normal credit policies. As of December 31, 2001
and 2000, these amounts totaled $124 million and $106 million, respectively. The
company currently believes the risk of loss to be minimal.
At December 31, 2001, the company had noncancelable operating lease commitments
totaling $217 million. The annual future minimum lease payments are detailed in
the table below.
(millions of dollars) Amounts
- --------------------------------------------------------------------------------
2002 $ 57
2003 45
2004 32
2005 28
2006 23
Thereafter 32
- --------------------------------------------------------------------------------
Total noncancelable operating lease commitments $ 217
================================================================================
The company's rent expense was $98 million, $93 million and $87 million for the
years 2001, 2000 and 1999, respectively.
15 BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated on a regular basis
by the chief operating decision maker, or decision making group, in deciding how
to allocate resources to an individual segment and in assessing performance of
the segment.
The company identifies such segments based upon geographical regions of
operations because each operating segment manufactures home appliances and
related components, but serves strategically different markets. The chief
operating decision maker evaluates performance based upon each segment's
operating profit, which is defined as income before interest income or interest
expense, taxes, minority interests and before other one-time charges.
Intersegment sales and transfers are generally at current market prices, as if
the sales or transfers were to third parties. The Other/Eliminations column
primarily includes corporate expenses and eliminations as well as all other
one-time charges.
<PAGE>
Intersegment sales are eliminated in the Other/Eliminations column. Total assets
are those assets directly associated with the respective segment's operating
activities. Other assets consist principally of assets related to corporate
activities. Sales activity with Sears, Roebuck and Co., a North American major
home appliance retailer, represented 21%, 20% and 18% of consolidated net sales
in 2001, 2000, 1999. Related receivables were 25%, 22% and 22% of consolidated
trade receivables as of December 31, 2001, 2000 and 1999.
The company conducts business in two countries that individually comprised over
ten percent of consolidated net sales and total assets within the last three
years. The United States represented 59%, 55% and 54% of net sales for 2001,
2000 and 1999, respectively, while Brazil totalled 9%, 11% and 11% for 2001,
2000 and 1999. As a percentage of total assets, the United States accounted for
44%, 41% and 39% at the end of 2001, 2000 and 1999. Brazil accounted for 14%,
18% and 19% of total assets at the end of 2001, 2000 and 1999, respectively.
As described above, the company's chief operating decision maker reviews each
operating segment's performance based upon operating profit excluding one-time
charges. In 2001, these one-time charges were comprised of restructuring and
related charges and product recall charges. These charges are included in
operating profit on a consolidated basis and included in the Other/Eliminations
column in the tables below. For year-to-date amounts, the operating segments
recorded total restructuring and related charges (refer to Note 10) as follows:
North America -- $35 million, Europe -- $92 million, Latin America -- $68
million, Asia -- $13 million and Corporate -- $4 million, for a total of $212
million. Also included in the Other/Eliminations column is $295 million of
product recall charges related to its North American region (refer to Note 11).
<PAGE>
<TABLE>
<CAPTION>
Geographic Segments
------------------------------------------------------------------------------------
North Latin Other / Total
(millions of dollars) America Europe America Asia Eliminations Whirlpool
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales
2001 $ 6,581 $ 2,058 $ 1,487 $ 373 $ (156) $ 10,343
2000 6,223 2,156 1,706 390 (150) 10,325
1999 6,159 2,452 1,668 375 (143) 10,511
- --------------------------------------------------------------------------------------------------------------------------------
Intangible amortization
2001 $ 3 $ 13 $ 3 $ 5 $ 4 $ 28
2000 3 13 3 5 5 29
1999 3 16 2 5 5 31
- --------------------------------------------------------------------------------------------------------------------------------
Depreciation
2001 $ 173 $ 78 $ 91 $ 15 $ 11 $ 368
2000 157 74 106 17 17 371
1999 151 88 95 21 31 386
- --------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss)
2001 $ 758 $ 39 $ 134 $ 19 $ (644) $ 306
2000 682 102 125 21 (123) 807
1999 725 177 120 13 (160) 875
- --------------------------------------------------------------------------------------------------------------------------------
Total assets
2001 $ 2,591 $ 2,067 $ 1,339 $ 653 $ 317 $ 6,967
2000 2,624 1,948 1,600 704 26 6,902
1999 2,254 1,921 1,653 719 279 6,826
- --------------------------------------------------------------------------------------------------------------------------------
Capital expenditures
2001 $ 191 $ 87 $ 80 $ 10 $ 10 $ 378
2000 175 94 86 10 10 375
1999 227 77 110 9 14 437
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
16 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
(millions of dollars, except per share data) Dec 31 Sep 30 Jun 30 Mar 31
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2001
Net sales $ 2,647 $ 2,594 $ 2,585 $ 2,517
Cost of products sold 1,989 1,988 1,989 1,959
Earnings (loss) from continuing operations 21 (94) 74 33
Net earnings (loss) 21 (94) 53 41
Per share of common stock
Basic earnings (loss) from continuing operations $ 0.31 $ (1.40) $ 1.12 $ 0.49
Basic net earnings (loss) 0.31 (1.40) 0.80 0.62
Diluted earnings (loss) from continuing operations $ 0.31 $ (1.40) $ 1.10 $ 0.49
Diluted net earnings (loss) 0.31 (1.40) 0.78 0.61
Dividends $ 0.34 $ 0.34 $ 0.34 $ 0.34
Significant after-tax items included in the quarterly net earnings:
Restructuring and related charges (note 10) $ (91) $ (11) $ (14) $ (40)
Product recalls (note 11) 3 (184) - -
Discontinued operations (note 4) - - (21) -
Cumulative effect of a change in accounting principle (note 1) - - - 8
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
(millions of dollars, except per share data) Dec 31 Sep 30 Jun 30 Mar 31
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000
Net sales $ 2,579 $ 2,570 $ 2,586 $ 2,590
Cost of products sold 1,965 1,973 1,958 1,942
- ---------------------------------------------------------------------------------------------------------
Earnings from continuing operations 67 67 121 112
Net earnings 67 67 121 112
Per share of common stock
Basic earnings from continuing operations $ 1.01 $ .98 $ 1.68 $ 1.53
Basic net earnings 1.01 .98 1.68 1.53
Diluted earnings from continuing operations $ 1.00 $ .98 $ 1.66 $ 1.52
Diluted net earnings 1.00 .98 1.66 1.52
Dividends $ .34 $ .34 $ .34 $ .34
Significant after-tax items included in the quarterly net earnings:
Voluntary retirement program $ - $ - $ - $ 23
One-time product introduction costs - - - (9)
Increased sales allowances - - - (8)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Report of Ernst & Young LLP -- Independent Auditors
The Stockholders and Board of Directors
Whirlpool Corporation
Benton Harbor, Michigan
We have audited the accompanying consolidated balance sheets of Whirlpool
Corporation as of December 31, 2001 and 2000, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Whirlpool Corporation as of December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.
As discussed in Note 1 to the consolidated financial statements, in 2001 the
Company changed its method of accounting for derivative instruments and hedging
activities.
Chicago, Illinois
<PAGE>
February 4, 2002
Report by Management on the Consolidated Financial Statements
The management of Whirlpool Corporation has prepared the accompanying financial
statements. The financial statements have been audited by Ernst & Young LLP,
independent auditors, whose report, based upon their audits, expresses the
opinion that these financial statements present fairly the consolidated
financial position, results of operations and cash flows of Whirlpool and its
subsidiaries in accordance with accounting principles generally accepted in the
United States. Their audits are conducted in conformity with auditing standards
generally accepted in the United States.
The financial statements were prepared from the company's accounting records,
books and accounts which, in reasonable detail, accurately and fairly reflect
all material transactions. The company maintains a system of internal controls
designed to provide reasonable assurance that the company's accounting records,
books and accounts are accurate and that transactions are properly recorded in
the company's books and records, and the company's assets are maintained and
accounted for, in accordance with management's authorizations. The company's
accounting records, policies and internal controls are regularly reviewed by an
internal audit staff.
The audit committee of the board of directors of the company, which is composed
of five directors who are not employed by the company, considers and makes
recommendations to the board of directors as to accounting and auditing matters
concerning the company, including recommending for appointment by the board the
firm of independent auditors engaged on an annual basis to audit the financial
statements of Whirlpool and its majority-owned subsidiaries. The audit committee
meets with the independent auditors at least three times each year to review the
scope of the audit, the results of the audit and such recommendations as may be
made by said auditors with respect to the company's accounting methods and
system of internal controls.
Mark E. Brown
Executive Vice President
and Chief Financial Officer
<PAGE>
Eleven-Year Consolidated Statistical Review
<TABLE>
<CAPTION>
(millions of dollars
except share and employee data) 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated operations
Net sales $10,343 $10,325 $10,511 $10,323 $8,617 $8,523 $8,163 $7,949 $7,368 $7,097 $6,550
Operating profit/1/ 306 807 875 688 11 278 366 370 504 447 353
Earnings (loss) from continuing
operations before income taxes
and other items 93 577 514 564 (171) 100 214 269 418 334 256
Earnings (loss) from continuing
operations 34 367 347 310 (46) 141 195 147 257 179 139
Earnings (loss) from discontinued
operations/2/ (21) - - 15 31 15 14 11 (28) 26 31
Net earnings (loss)/3/ 21 367 347 325 (15) 156 209 158 51 205 170
Net capital expenditures 378 375 437 523 378 336 483 418 309 288 287
Depreciation 368 371 386 399 322 318 282 246 241 275 233
Dividends paid 113 70 103 102 102 101 100 90 85 77 76
Consolidated financial position
Current assets $3,311 $3,237 $3,177 $3,882 $4,281 $3,812 $3,541 $3,078 $2,708 $2,740 $ 2,920
Current liabilities 3,082 3,303 2,892 3,267 3,676 4,022 3,829 2,988 2,763 2,887 2,931
Current assets minus current
liabilities 229 (66) 285 615 605 (210) (288) 90 (55) (147) (11)
Property, plant and equipment-net 2,052 2,134 2,178 2,418 2,375 1,798 1,779 1,440 1,319 1,325 1,400
Total assets 6,967 6,902 6,826 7,935 8,270 8,015 7,800 6,655 6,047 6,118 6,445
Long-term debt 1,295 795 714 1,087 1,074 955 983 885 840 1,215 1,528
Stockholders' equity 1,458 1,684 1,867 2,001 1,771 1,926 1,877 1,723 1,648 1,600 1,515
Per share data
Basic earnings (loss) from continuing
operations before accounting change $ 0.51 $ 5.24 $ 4.61 $ 4.09 $(0.62) $ 1.90 $ 2.64 $ 1.98 $ 3.60 $ 2.55 $ 2.00
Diluted earnings (loss) from continuing
operations before accounting change 0.50 5.20 4.56 4.06 (0.62) 1.88 2.60 1.95 3.47 2.46 1.98
Diluted net earnings (loss)/3/ 0.31 5.20 4.56 4.25 (0.20) 2.08 2.78 2.10 0.71 2.81 2.41
Dividends 1.36 1.36 1.36 1.36 1.36 1.36 1.36 1.22 1.19 1.10 1.10
Book value 21.44 23.84 24.55 26.16 23.71 25.93 25.40 23.21 23.17 22.91 21.78
Closing Stock Price - NYSE 73.33 47.69 65.06 55.38 55.00 46.63 53.25 50.25 66.50 44.63 38.88
- -----------------------------------------------------------------------------------------------------------------------------------
Key ratios/4/
Operating profit margin 3.0% 7.8% 8.3% 6.7% 0.1% 3.3% 4.5% 4.7% 6.8% 6.3% 5.4%
Pre-tax margin/5/ 0.9% 5.6% 4.9% 5.5% (2.0)% 1.2% 2.6% 3.4% 5.7% 4.7% 3.9%
Net margin/6/ 0.3% 3.6% 3.3% 3.0% (0.5)% 1.7% 2.4% 1.8% 3.5% 2.5% 2.1%
Return on average stockholders'
equity/7/ 1.3% 20.7% 17.9% 17.2% (0.8)% 8.2% 11.6% 9.4% 14.2% 13.1% 11.6%
Return on average total assets/8/ 0.4% 5.5% 4.2% 4.6% (0.7)% 1.8% 3.0% 2.8% 4.0% 3.3% 2.9%
Current assets to current
liabilities 1.1x 1.0x 1.1x 1.2x 1.2x 0.9x 0.9x 1.0x 1.0x 0.9x 1.0x
Total debt-appliance business as a
percent of invested capital/9/ 48.0% 49.4% 37.7% 43.5% 46.1% 44.2% 45.2% 35.6% 33.8% 42.8% 46.7%
Price earnings ratio 236.5x 9.2x 14.3x 13.0x - 22.4x 19.2x 23.9x 21.2x 15.9x 16.1x
Interest coverage/10/ 1.6x 4.2x 4.1x 3.2x - 1.6x 2.7x 3.6x 5.0x 3.5x 3.0x
Other data
Number of common shares
outstanding (in thousands):
Average - on a diluted basis 68,036 70,637 76,044 76,507 74,697 77,178 76,812 77,588 76,013 75,661 72,581
Year-end 67,215 66,265 74,463 76,089 75,262 74,415 74,081 73,845 73,068 70,027 69,640
Number of stockholders (year-end) 8,840 11,780 12,531 13,584 10,171 11,033 11,686 11,821 11,438 11,724 12,032
Number of employees (year-end) 59,408 60,695 61,066 58,630 61,370 48,163 45,435 39,016 39,590 38,520 37,886
Total return to shareholders (five
year annualized)/11/ 12.2% 0.3% 7.9% (1.2)% 6.8% 6.3% 20.8% 12.0% 25.8% 17.0% 6.7%
====================================================================================================================================
</TABLE>
1. Restructuring and special operating charges were $212 million in 2001, $405
million in 1997, $30 million in 1996 and $250 million in 1994.
2. The Company's financial services business was discontinued in 1997.
3. Includes cumulative effect of accounting changes: 2001 - Accounting for
derivative instruments and hedging activities of $8 million or $0.12 per
diluted share; 1993 - Accounting for postretirement benefits other than
pensions of ($180) million or ($2.42) per diluted share.
4. Excluding one-time charges for restructuring and related charges, product
recalls, discontinued operations and accounting changes in 2001, selected
key ratios would be as follows: a) Operating profit margin -7.9%, b) Pre-tax
margin -5.8%, c) Net margin - 3.6%, d) Return on average stockholder's
equity - 22.2%, e) Return on average total assets - 5.6%, and f) Interest
coverage - 5x. Excluding the first quarter impact of the Brazilian currency
devaluation in 1999 and the gain from discontinued operations in 1998,
returns on average stockholders' equity were 19.9% and 16.5%, and returns on
average total assets were 5.7% and 4.3%. Excluding non-recurring items,
selected 1997 Key Ratios would be as follows: a) Operating profit margin
-4.7%, b) Pre-tax margin - 2.7%, c) Net margin - 2.6%, d) Return on average
stockholders' equity - 12%, e) Return on average total assets - 2.7%, f)
Interest coverage -3.x%.
5. Earnings from continuing operations before income taxes and other items,
as a percent of sales.
6. Earnings from continuing operations, as a percent of sales.
7. Net earnings (loss) before accounting change, divided by average
stockholders' equity.
8. Net earnings (loss) before accounting change, plus minority interest divided
by average total assets.
9. Debt divided by debt, stockholders' equity and minority interests.
10. Ratio of earnings from continuing operations (before income taxes,
accounting change and interest expense) to interest expense.
11. Stock appreciation plus reinvested dividends.
<PAGE>
Directors and Senior Management
Directors
Herman Cain 2,3
Chairman of the Board, Godfather's Pizza, Inc. and
Chief Executive Officer, T.H.E., Inc.
Gary T. DiCamillo 1,2
Chairman and Chief Executive Officer,
Polaroid Corporation
Jeff M. Fettig
President and Chief Operating Officer of the Company
Allan D. Gilmour 3,4
Former Vice Chairman, Ford Motor Company
Kathleen J. Hempel 1,3
Former Vice Chairman and Chief Financial Officer,
Fort Howard Corporation
James M. Kilts 2,4
Chairman and Chief Executive Officer,
The Gillette Company
Arnold G. Langbo 2,4
Former Chairman of the Board and
Chief Executive Officer, Kellogg Company
Miles L. Marsh 1,3
Former Chairman and Chief Executive Officer,
Fort James Corporation
Philip L. Smith 2,3
Former Chairman of the Board and
Chief Executive Officer, The Pillsbury Company
<PAGE>
Paul G. Stern 1,3
Partner, Thayer Capital Partners, LLP and
Arlington Capital Partners, LLP
Janice D. Stoney 1,4
Former Executive Vice President,
US WEST Communications Group, Inc.
David R. Whitwam
Chairman of the Board and
Chief Executive Officer of the Company
Committees
1. Audit
2. Corporate Governance and Nominating
3. Finance
4. Human Resources
Executive Committee
David R. Whitwam
Chairman of the Board and Chief Executive Officer
Jeff M. Fettig
President and Chief Operating Officer
Mark E. Brown
Executive Vice President and Chief Financial Officer
Daniel F. Hopp
Senior Vice President, Corporate Affairs and General Counsel
Paulo F. M. Periquito
Executive Vice President and President, Latin America
David L. Swift
Executive Vice President, North American Region
Michael D. Thieneman
Executive Vice President and Chief Technology Officer
Michael A. Todman
Executive Vice President and President, Whirlpool Europe
Senior Officers (Vice Presidents)
J.C. Anderson
Senior Vice President, North American Region Operations
Roy V. Armes
Global Procurement Operations
Betty A. Beaty
Controller
David A. Binkley
Global Human Resources
Marc R. Bitzer
Senior Vice President, Marketing, Sales and Services,
Whirlpool Europe
R. David Butler
Chief Information Officer
<PAGE>
Ruy Campos
Brazil Sales, Multibras
Blair A. Clark
Treasurer
Daniel G. Clifford
Sears Sales and Marketing, North America
Ted A. Dosch
Finance, North America
Garrick D'Silva
Regional Vice President, Whirlpool Asia
Ernesto Heinzelmann
President and Chief Executive Officer, Embraco S. A.
Barry Holt
Global Communications
Rubin J. McDougal
Finance and Administration, Whirlpool Europe
Gregory T. McManus
Sales and Distribution, North America
Giuseppe Perucchetti
Bauknecht Brand Group, Whirlpool Europe
Roberto Ronchi
Whirlpool Brand Group, Whirlpool Europe
G. Alan Shaw
Customer Relationship Management, North America
Nancy T. Snyder
Strategic Competency Creation
Jeremy S. Weinstein
Operations and Supply Chain, Whirlpool Europe
W. Timothy Yaggi
Whirlpool Brand, North America
Stockholders' and Other Information
Financial information
Whirlpool Corporation's annual report on Form 10-K, a cassette-tape recording of
the annual report to shareholders and other financial information is available
free of charge.
If you are not a stockholder of record-- that is, if your
Whirlpool shares are registered in the name of a broker, bank or other nominee--
you must ask that holder to mail stockholder reports directly to you. Company
earnings releases for each quarter-- typically issued in April, July, October
and January-- can be obtained by contacting
Whirlpool's Director, Investor Relations:
Tom Filstrup, Whirlpool Corporation
2000 N. M-63, Mail Drop 2800
Benton Harbor, MI 49022-2692
Telephone: 616.923.3189 Fax: 616.923.3525
E-mail: thomas_c_filstrup@email.whirlpool.com
Transfer Agent, Shareholder Records, Dividend
<PAGE>
Disbursements and Corporate Secretary
For information about or assistance with individual stock records, transactions,
dividend checks or stock certificates, contact:
EquiServe Trust Company, N.A.
Shareholder Services
P.O. Box 2500, Jersey City, NJ 07303-2500
Telephone: 800.446.2617
www.equiserve.com
For additional information about the company contact:
Robert T. Kenagy, Corporate Secretary
Whirlpool Corporation, 2000 N. M-63, Mail Drop 2200
Benton Harbor, MI 49022-2692
Telephone: 616.923.3910 Fax: 616.923.3722
E-mail: robert_t_kenagy@email.whirlpool.com
Direct Stock Purchase Plan
As a participant in the DirectSERVICE Investment and Stock
Purchase PROGRAM, you can be the direct owner of your shares of Whirlpool Common
Stock. Non-shareholders may purchase their initial shares through the plan for a
minimum investment of $250, or through automatic bank account debits of $50 for
five months. Participants may make cash contributions of up to $250,000
annually, invested daily, with or without reinvesting their dividends, and can
sell part of the shares held in the program without exiting the plan. There are
modest transaction processing fees and brokerage commissions for purchases,
sales and dividend reinvestment. For details, contact EquiServe or visit their
Direct Stock Purchase Plan web site to enroll.
Trustee for 9.1% Notes
JP Morgan Chase
450 West 33rd Street, 15th Floor
New York, NY 10001
Trustee for 7.75%, 9% and 8.6% Notes
Citibank N.A., Global Agency & Trust
111 Wall Street, 5th Floor
New York, NY 10043
Annual Meeting
Whirlpool Corporation's next annual meeting is scheduled for April 16, 2002, at
9:30 a.m. (Central Time), at 181 West Madison Street, 7th Floor, Chicago, IL.
Stock Exchanges
Common stock of Whirlpool Corporation (exchange symbol: WHR) is listed on the
New York and Chicago stock exchanges.
Stock-Split exchange and dividend History
March 1952, 2-for-1 stock exchange
December 1954, 100% stock dividend
May 1965, 2-for-1
May 1972, 3-for-1
December 1986, 2-for-1
<PAGE>
Example: 100 shares of Whirlpool common stock purchased in February, 1952
equaled 4,800 shares in January 2002.
Common-Stock Market Price
<TABLE>
<CAPTION>
High Low Close
<S> <C> <C> <C>
4Q 2001 $ 74.20 $ 53.25 $ 73.33
3Q 2001 71.93 50.20 55.35
2Q 2001 65.50 48.81 62.50
1Q 2001 57.38 45.88 49.99
4Q 2000 $ 49.44 $ 34.56 $ 47.69
3Q 2000 54.06 31.50 38.88
2Q 2000 68.31 46.63 46.63
1Q 2000 64.56 48.63 58.63
</TABLE>
Trademarks
AccuBake Duo System, All Refrigerator, Aquashower, Architect, Bauknecht,
Brastemp,
Calypso, Cielo, Cook for the Cure, Conquest, Consul, Cuisine, Dry
Defrost, Duet, Duo
System, Duplex Frost Free, Dynamic Sense, Eficiencia Master, Embraco, Eslabon de
Lujo, Estate, Fire Genie, i enabled, Ice Magic, Ignis, In-Door-Ice, Inglis,
Inspired Chef,
Intelligent, Intelligent Dialogue, Intelligent Stain Remover, Jet Defrost, KIC,
KitchenAid,
Laden, MagiCook, Maximo, Millennium, Modular, Mosaic, Personal Valet, Point
System, Pro Line, QuickChill, Refrigerator Inside Freezer, Roper, Servis, 6th
Sense,
Solution, Talent, Tall Tub, Ultima Cook, Ultra Ease, Water Genie, Whisper Quiet,
Whitemagic, Whitemagic
Hotwash and Whirlpool are trademarks of Whirlpool Corporation or its wholly or
majority-owned affiliates.
Kenmore, Kenmore Elite and HE3t are trademarks of Sears, Roebuck and Co.
Acros, Crolls and Supermatic are trademarks of Vitro S.A. de C.V.
EnergyStar is a U.S. registered mark.
Procel is a Brazil registered mark.
(C)2002 Whirlpool Corporation. All rights reserved.
Internet Address
Whirlpool financial information and more are available at Whirlpool's site on
the internet: www.whirlpoolcorp.com.
Whirlpool Corporation General Offices
World Headquarters and North America
2000 N. M-63
Benton Harbor, MI 49022-2692
Telephone: 616.923.5000
Europe
Viale G. Borghi 27
21025 Comerio (VA), Italy
Telephone: 39.0332.759.111
Fax: 39.0332.759.347
Latin America
<PAGE>
Av. das Nacoes Unidas N. 12.995
Sao Paulo-S.P. CEP 04578-000, Brazil
Telephone: 55.11.5586.6473
Fax: 55.11.5586.6388
Asia
16th Floor, Paliburg Plaza
68 Yee Wo St.
Causeway Bay, Hong Kong
Telephone: 852.2881.0882
Fax: 852.2881.1018
Product and Service Information (North America)
KitchenAid brand: 800.422.1230
Whirlpool brand: 800.253.1301
Whirlpool Vision
Every Home... Everywhere with Pride, Passion and Performance. We create the
world's best home appliances, which make life a little easier and more enjoyable
for all people. Our goal is a Whirlpool product in every home, everywhere. We
will achieve this by creating:
Pride... in our work and each other
Passion... for creating unmatched customer loyalty for our brands
Performance... results that excite and reward global investors with
superior returns
We bring this dream to life through the power of our unique global enterprise
and our outstanding people... working together... everywhere.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>dex21.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>
<PAGE>
Subsidiaries
------------
Subsidiary and Name Jurisdiction In
Under Which It Does Business Which Organized
- ---------------------------- ---------------
Whirlpool Europe B.V. The Netherlands
Whirlpool Properties, Inc. Michigan
Whirlpool Patents Company Michigan
Brasmotor S.A. Brazil
Multibras S.A. Eletrodomesticos Brazil
The names of the Company's other subsidiaries are omitted because, considered in
the aggregate as a single subsidiary, such subsidiaries would not constitute a
significant subsidiary as of December 31, 2001.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>dex23.txt
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP
<TEXT>
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in Registration Statement Nos.
33-34490, 33-34037, 33-21360, 33-00201, 2-64261, 33-05904, 33-40249, 333-02827,
333-02825, 333-66211, 333-77167, 333-32886, 333-42322, 333-72698, and 333-73726
of Whirlpool Corporation and Registration Statement Nos. 33-26680 and 33-53196
of Whirlpool Corporation pertaining to the Whirlpool Savings Plan and
Registration Statement No. 333-66163 of Whirlpool Corporation pertaining to the
Whirlpool 401(k) Plan of our report, dated February 4, 2002, with respect to the
consolidated financial statements and schedule of Whirlpool Corporation,
included in this Annual Report (Form 10-K) for the year ended December 31, 2001.
/s/ Ernst & Young LLP
Chicago, Illinois
March 1, 2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>9
<FILENAME>dex24.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both, of WHIRLPOOL CORPORATION, a Delaware corporation
(hereinafter called the "Corporation"), does hereby constitute and appoint DAVID
R. WHITWAM, JEFF M. FETTIG, and DANIEL F. HOPP, with full power to each of them
to act alone, as the true and lawful attorneys and agents of the undersigned,
with full power of subtitution and resubstitution to each of said attorneys, to
execute, file or deliver any and all instruments and to do all acts and things
which said attorneys and agents, or any of them, deem advisable to enable the
Corporation to comply with the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing under said Securities Exchange Act of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2001, including specifically, but
without limitation of the general authority hereby granted, the power and
authority to sign his or her name as a director or officer, or both, of the
Corporation, as indicated below opposite his or her signature, to the Annual
Report on Form 10-K, or any amendment, post-effective amendment, or papers
supplemental thereto to be filed in respect of said Annual Report on Form 10-K;
and each of the undersigned does hereby fully ratify and confirm all that said
attorneys and agents, or any of them, or the substitute of any of them, shall do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these presents,
as of the 19th day of February, 2002.
Name Title
/s/ David R. Whitwam Director, Chairman of the Board and
- -------------------- Chief Executive Officer
David R. Whitwam (Principal Executive Officer)
/s/ Jeff M. Fettig Director, President and
- ------------------ Chief Operating Officer
Jeff M. Fettig (Principal Operating Officer)
/s/ Mark E. Brown Executive Vice President and
- ----------------- Chief Financial Officer
Mark E. Brown (Principal Financial Officer)
/s/ Betty A. Beaty Vice President and Controller
- ------------------ (Principal Accounting Officer)
Betty A. Beaty
<PAGE>
/s/ Herman Cain Director
- ---------------------
Herman Cain
/s/ Gary T. DiCamillo Director
- ---------------------
Gary T. DiCamillo
/s/ Allan D. Gilmour Director
- ---------------------
Allan D. Gilmour
/s/ Kathleen J. Hempel Director
- ---------------------
Kathleen J. Hempel
/s/ James M. Kilts Director
- ---------------------
James M Kilts
/s/ Arnold G Langbo Director
- ---------------------
Arnold G. Langbo
_____________________ Director
Miles L. Marsh
/s/ Philip L. Smith Director
- ---------------------
Philip L. Smith
_____________________ Director
Paul G. Stern
/s/ Janice D. Stoney Director
- ---------------------
Janice D. Stoney
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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