- - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- 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 [FEE REQUIRED] For the fiscal year ended December 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] COMMISSION FILE NUMBER 1-3932 WHIRLPOOL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-1490038 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 2000 NORTH M-63, BENTON HARBOR, 49022-2692 MICHIGAN (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (616) 923-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: <TABLE> <CAPTION> NAME OF EACH EXCHANGE TITLE OF CLASS ON WHICH REGISTERED -------------- --------------------- <S> <C> Common stock, par value $1.00 per share Chicago Stock Exchange New York Stock Exchange 7 3/4% Debentures due 2016 New York Stock Exchange </TABLE> 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 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 elected 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 March 3, 1997, was $3,682,350,173. On March 3, 1997, the registrant had 74,842,729 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 DOCUMENT WHICH INCORPORATED -------- ---------------------- <S> <C> The Company's annual report to stockholders for the year ended December 31, 1996 Parts I, II and IV The Company's proxy statement for the 1997 annual meeting of stockholders (SEC File No. 1-3932) Part III </TABLE> EXHIBIT INDEX ON PAGE:** TOTAL NUMBER OF PAGES:*** - - ------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------
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. As used herein, and except where the context otherwise requires, the term "Company" includes Whirlpool Corporation and its consolidated subsidiaries. All currency figures are in U.S. dollars. RECENT DEVELOPMENTS NORTH AMERICA In July 1996, the Company announced that following an evaluation by Sears Roebuck and Co. ("Sears"), the Company's largest trade customer, Sears would continue its business with the Company. In addition to providing laundry products, dishwashers, refrigerators, trash compactors and air control products under Sears' KENMORE and SEARS brand names, the Company will continue to sell KITCHENAID and WHIRLPOOL brand appliances through Sears' Brand Central outlets. In early 1996, the Company began production of gas and electric cooking ranges at a new facility in Tulsa, Oklahoma and small appliances at a new small appliance manufacturing facility in Greenville, Ohio. EUROPE In October 1996, the Company acquired the remaining minority (28%) equity interest in Whirlpool Tatramat (in the Republic of Slovakia) it did not already own for a purchase price of approximately $4 million. In September 1996, the Company acquired Gentech Trading Ltd. ("Gentech"), one of the largest appliance distributors and manufacturers in South Africa, from Power Technologies Group of Johannesburg, South Africa for a purchase price of approximately $27 million, consisting of $2 million in cash and $25 million in assumed liabilities. Gentech, renamed Whirlpool South Africa, manufactures refrigerators and markets manufactured and imported appliances under the WHIRLPOOL and local KIC brand names. Gentech's annual sales were about $100 million for its fiscal year 1995. ASIA During 1996, the Company closed its Whirlpool Asia research and engineering center in Singapore to more effectively use global technological product development resources, including existing technology centers located in the United States and Europe, to develop products for the Asia market. At the same time, the Company consolidated and relocated its Singapore regional headquarters to Hong Kong to achieve greater proximity to the majority of the Company's business in Asia. In November 1996, Whirlpool of India signed a memorandum of understanding ("MOU") with Tecumseh Products Company of the USA ("Tecumseh"), a global manufacturer of compressors, to sell WOI's compressor division and related facilities at Faridabad and Ballabhgarh, India. Under the terms of the MOU, Tecumseh would enter into a long-term supply agreement with the Company pursuant to which the Company would be required to purchase and Tecumseh would be required to sell compressors to the Company. The agreement is contingent upon receiving all necessary government and regulatory approvals and the transaction is expected to be finalized during 1997. 1
In May 1996, two of the Company's majority owned subsidiaries in India, Kelvinator of India ("KOI") and Whirlpool Washing Machines Limited ("WWML"), were merged and renamed Whirlpool of India ("WOI"). As part of the merger plan, the Company purchased an additional 27% interest in WWML for $12 million in April 1996 for a total interest of 78% in WWML. The merger will result in the Company having a 56% interest in the combined entity, WOI. FINANCIAL INFORMATION RELATING TO BUSINESS SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The Company operates predominantly in the business segments classified as Major Home Appliances and Financial Services. During 1996, the Company's U.S. operations sold product into Canada, Mexico, Latin America, Asia, Europe, Africa and the Middle East. However, export sales by the Company's U.S. operations were less than 10 percent of gross revenues. 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 Company's Annual Report to Stockholders (the "Annual Report"), which information is incorporated herein by reference. PRODUCTS AND SERVICES The Company manufactures and markets a full line of major home appliances and related products for home and commercial use and provides certain inventory, consumer, and other financial services. The Company's principal products and financial services are as follows: Major Home Appliances: Home laundry appliances: automatic and semi-automatic washers; automatic dryers; coin-operated laundry machines; and stacked washer-dryer units. Home refrigeration and room air conditioning equipment: refrigerator- freezers; upright and chest freezers; room air conditioners; dehumidifiers; and residential, commercial, and component ice makers; compact refrigerators; and wine coolers. Home cooking appliances: free-standing and set-in ranges; built-in ovens and surface cooking units; microwave ovens; countertop cooking units; and range hoods. Small household appliances: stand mixers; hand mixers; food processors; blenders; and toasters. Other home appliances, products and services: dishwashers; residential trash compactors; food waste disposers; hot water dispensers; water filtration products; oil radiators; water heaters; kitchen sinks; component parts; replacement parts, repair services and warranty contracts; and product kits. Financial Services: Whirlpool Financial Corporation ("WFC") provides inventory financing and factoring services, including stocking and display programs for retailers and distributors that market products manufactured by the Company in North America and various countries in Europe, Latin America and Asia plus other manufacturers of consumer durables in the United States and Canada. It also provides consumer financing services for retail sales in the United States, principally through Whirlpool Financial National Bank ("WFNB") which offers consumer credit card programs and in India through Whirlpool Apple Consumer Credit Pvt. Ltd., a joint venture between a subsidiary of WFC and Apple Industries Limited. WFC continues to phase out its aerospace financing and leasing portfolios. 2
The Company purchases a portion of its product requirements from other manufacturers for resale by the Company. The Company purchases some of its requirements of twin tub washers, and all of its requirements of certain cooking products, range hoods, food waste disposers, upright and chest freezers (North America only), wine coolers, food processors and certain other miscellaneous products from other manufacturers for resale by the Company. For certain information with respect to each class of similar products which accounted for 10 percent or more of the Company's consolidated revenue in 1996, 1995, and 1994, see "Revenue Information" in the Annual Report, which information is incorporated herein by reference. The Company has been the principal supplier of home laundry appliances to Sears for over 80 years. The Company is also the principal supplier to Sears of residential trash compactors and dehumidifiers and a major supplier to Sears of dishwashers, room air conditioners, and home refrigeration equipment. The Company also supplies Sears with certain other products for which the Company is not currently a major supplier. Sales of such other products to Sears are not significant to the Company's business. The Company supplies products to Sears for sale under Sears' KENMORE and SEARS brand names. Sears has also been a major outlet for the Company's WHIRLPOOL and KITCHENAID brand appliances since 1989. As previously noted under the caption "Recent Developments," the Company announced that following an evaluation by Sears of its home appliance suppliers, Sears would retain it business relationship with the Company. Major home appliances are marketed and distributed in the United States under the WHIRLPOOL, KITCHENAID, ROPER, ESTATE, CHAMBERS, and COOLERATOR brand names through Company-owned sales branches primarily to retailers and builders. KITCHENAID portable appliances are sold to retailers either directly or through an independent representative organization. The Company sells product to the builder trade both directly and through contract distributors. Major home appliances are manufactured and/or distributed in Canada under the INGLIS, ADMIRAL, SPEED QUEEN, WHIRLPOOL, ESTATE, ROPER, and KITCHENAID brand names. Refrigerator-freezers, laundry products, room air conditioners, residential trash compactors, residential and component ice makers, cooking products, dishwashers, and other products are sold in limited quantities by the Company to other manufacturers and retailers for resale in North America under their respective brand names. In Europe, Whirlpool Europe markets and distributes its major home appliances through regional networks under the WHIRLPOOL, BAUKNECHT, IGNIS, and LADEN brand names. In certain Eastern European countries, products bearing the WHIRLPOOL and IGNIS brand names are sold through independent distributors. Whirlpool Europe also has company-owned sales subsidiaries in Hungary, Poland, the Czech Republic, Slovakia, Greece, Romania, Bulgaria, and Morocco and a representative office in Russia. Whirlpool Europe has a subsidiary in South Africa through which it markets products under the WHIRLPOOL and KIC brand names. Whirlpool Europe also sells products carrying the WHIRLPOOL, BAUKNECHT, IGNIS, ALGOR, and FIDES brand names to the Company's wholly-owned sales companies in Asia and/or Latin America (Whirlpool Asia Appliance Group and the Latin America Appliance Group) and to independent distributors and retailers in Africa and the Middle East. In Asia, the Company markets and distributes its major home appliances through three operating regions: the Greater China region, based in Hong Kong, which includes the Peoples Republic of China and Hong Kong; the South Asia region, based in Delhi, which includes India, Pakistan, and other surrounding markets; and the Asia Pacific Sales region, based in Singapore, which includes Southeast Asia, Japan, Korea, the Philippines, Thailand, Taiwan, Australia, and New Zealand. The Company markets and sells its products in Asia under the WHIRLPOOL, KITCHENAID, ROPER, IGNIS, BAUKNECHT, and RAYBO brand names as well as under the SMC, NARCISSUS and SNOWFLAKE brand names (owned by its joint venture partners and used under license). At the end of 1996, the Company discontinued its licensed use of the KELVINATOR OF INDIA name and the KELVINATOR brand for refrigerators. The Company also discontinued its licensed use of the TVS brand name effective beginning in 1997. 3
WHIRLPOOL FINANCIAL CORPORATION WFC provides diversified financial services to businesses and consumers throughout the United States and Canada and factoring, inventory and display financing activities in Europe, Mexico, Argentina, India and Thailand. WFC conducts its business through three divisions: the Inventory Finance Division, which provides floorplan financing and display programs to retailers in the United States and Canada; the Consumer Finance Division, which provides installment financing and, through WFNB, WFC's credit card bank, consumer credit card programs in the United States; and the International Division, operated through Whirlpool Financial Corporation International and its subsidiaries, Whirlpool Financial Latin America Inc. and Whirlpool Financial Corporation Overseas, wholly-owned subsidiaries of WFC, which provide factoring, inventory and display financing for retailers of products of Whirlpool Europe, Whirlpool Argentina, Vitromatic, Whirlpool's joint venture company in Mexico, Whirlpool India, and Whirlpool Thailand. Inventory financing represents the largest segment of WFC's business, providing services for manufacturers, distributors, and retailers in the appliance, consumer electronics, outdoor power equipment, residential heating and cooling equipment, and music industries. As previously mentioned, WFC is phasing-out its aerospace financing and leasing portfolios. COMPETITION The major home appliance business is highly competitive. The Company believes that, in terms of units sold annually, it is the largest U. S. manufacturer of home laundry appliances and one of the largest United States manufacturers of home refrigeration and room air conditioning equipment and dishwashers. The Company estimates that during 1996 with respect to United States manufacturers, there were approximately five manufacturers of home laundry appliances, 10 manufacturers of room air conditioning equipment, five manufacturers of home refrigeration equipment, and four manufacturers of dishwashers. Competition in the North American major home appliance business is based on a wide variety of factors, including principally product features, price, product quality and performance, service, warranty, advertising, and promotion. The Company believes that Whirlpool Europe, in terms of units sold annually, is one of the three largest manufacturers and marketers of major home appliance products in Europe. The Company estimates that during 1996 there were approximately 35 European manufacturers of major home appliances, the majority of which manufacture a limited range of products for a specific geographic region. In recent years, there has been significant merger and acquisition activity as manufacturers seek to broaden product lines and expand geographic markets, and the Company believes that this trend will continue. The Company believes that, with Whirlpool Europe, it is in a favorable position relative to its competitors because it has an experienced European sales network, balanced sales throughout the European market under well- recognized brand names, manufacturing facilities located in different countries, and the ability to customize its products to meet the specific needs of diverse consumer groups. Competition in the European major home appliance business is based on a wide variety of factors, including principally product features, price, product quality and performance, service, warranty, advertising, and promotion. With respect to microwave ovens, European manufacturers face competition from manufacturers in Asia, primarily Japan and South Korea. In Asia, the major domestic appliance market is characterized by rapid growth and is dominated primarily by Asian diversified industrial manufacturers whose significant size and scope of operations enable them to achieve economies of scale. Products imported from Europe and North America have a significant presence in some Asian markets. The Company estimates that during 1996 there were approximately 50 manufacturers of major home appliances competing in the Asian market. Competition in the Asian home appliance market is based on a wide variety of factors, including principally local production capabilities, product features, price, product quality, and performance. The Company believes that, together with its Brazilian affiliates, it is well-positioned in the Latin American appliance market due to its ability to offer a broad range of products under well-recognized brand names such as WHIRLPOOL and the BRASTEMP and CONSUL brand names (owned by its Brazilian affiliate and used under license) 4
to meet the specific requirements of consumers in the region. The Company estimates that during 1996 there were approximately 65 manufacturers of home appliances in the region. Competition in the Latin American home appliance business is based on a wide variety of factors, including principally product features, price, product quality and performance, service, warranty, advertising, and promotion. In Latin America there are trends toward privatization of government-owned businesses and a liberalization of investment and trade restrictions. In addition the Company's majority-owned sales company exports products to the Latin American market under the ALGOR, FIDES, and IGNIS brand names. As a result of its global expansion, the Company believes it may have a competitive advantage by reason of its ability to share engineering capabilities across regions, transfer best practices, and economically purchase raw materials and component parts in large volumes. The financial services industry is an intensely competitive business. Factors affecting competition include new entrants into a market experiencing only moderate growth and the continuing pressure to improve investment returns in the financial services industry. With respect to inventory financing, there has been a trend toward consolidation resulting in five dominant companies in the United States market. In terms of total assets, WFC is the smallest of these companies. WFC believes it has a competitive advantage due to its strong relationship with the Company and other distribution networks. In the inventory finance business, WFC's strategy is to exploit niches within the consumer durables retail market. In consumer finance, WFC utilizes the same retailer relationships to address the needs of their consumers through private label credit card programs. The consumer finance market is highly fragmented with numerous competitors, none of which has a dominant market share. EMPLOYEES The Company and its consolidated subsidiaries had approximately 48,000 employees as of December 31, 1996. OTHER INFORMATION The Company owns minority equity interests in certain Brazilian manufacturers of major home appliances and components (Multibras and Embraco) and has a controlling interest in a sales and marketing joint venture (the South American Sales Company) with Multibras. The Company has a significant minority equity interest in a major manufacturer of kitchen furniture in Germany which is also a major trade customer of the Company. The Company also has a majority interest in a joint venture company in Argentina which manufactures home appliances for sale and distribution in its home and surrounding markets. In China, the Company has majority interests in joint venture companies that manufacture microwave ovens, refrigeration products, air conditioners and automatic washing machines for sale and distribution in their home countries and for export. In India, the Company has a majority interest in a company that produces refrigeration products and washing machines for the Indian market and for export to the rest of Asia. The Company also has minority equity interests in a Mexican manufacturer of home appliances and components and a Taiwanese marketer and distributor of home appliances. In China, the Company has a minority equity interest in a compressor manufacturing joint venture between its Brazilian affiliate and a company in China which manufactures refrigeration products and is a joint venture affiliate of the Company. For additional information regarding the Company's affiliated companies, see the discussion contained under Note 5 of the Notes to Consolidated Financial Statements in the Annual Report which is incorporated herein by reference. In addition, the Company furnishes engineering, manufacturing and marketing assistance to certain foreign manufacturers of home laundry and refrigeration equipment and other major home appliances for negotiated fees. The Company's interests outside the United States and Western Europe are subject to risks which may be greater than or in addition to those risks currently present in the United States and Western Europe. Such risks may include high inflation, the need for governmental approval of and restrictions on certain financial and other 5
corporate transactions and new or continued business operations, government price controls, restrictions on the remittance of dividends, interest, royalties, and other payments, and the convertibility of local currencies, restrictions on imports and exports, duties, political and economic developments and instability, the possibility of expropriation, uncertainty as to the enforceability of commercial rights and trademarks, and various types of local participation in ownership. In Brazil, the Company's minority equity interests earned profits in 1995 and 1996 due to lower interest rates, availability of consumer credit, higher purchasing power in certain market segments, cost control, productivity improvements, and an increase in consumer demand. However, issues such as economic volatility and exchange rate changes continue to affect consumer purchasing power and the appliance industry as a whole. The Company is generally not dependent on 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, it is believed that 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 the U.S. and foreign registrations thereof. The most important for its North American operations are the trademarks WHIRLPOOL, KITCHENAID, ROPER, and INGLIS. Whirlpool Europe, through its subsidiaries, is also the owner of a number of trademarks and the foreign registrations thereof. The most important trademarks owned by Whirlpool Europe are BAUKNECHT, IGNIS, and LADEN. The most important trademark for the Company's European, Asian and Latin American operations is WHIRLPOOL. The most important trademark licensed to the Company's subsidiaries is the trademark PHILIPS and the PHILIPS shield emblem, which can be used exclusively on major home appliances by such subsidiaries until July 31, 1998. In the event of a change in control of the Company, Philips ("Philips") has the option to terminate the use by the Company's subsidiaries of the trademark PHILIPS and the PHILIPS shield emblem. Pursuant to the agreement whereby the Company purchased most of Whirlpool Europe's business from Philips, except for certain limited exceptions and subject to certain phase-out provisions, neither Philips nor any subsidiary of Philips may engage directly or indirectly in the major domestic appliance business anywhere in the world until July 31, 1998. The Company believes that its business, in the aggregate, is not seasonal. Certain of its products, however, sell more heavily in some seasons than in others. In the United States, room air conditioners and dehumidifiers are generally produced and sold heavily in the first half of each year. Refrigerators have a seasonal increase in production and sales from May through September. Portable appliances and microwave ovens tend to sell more heavily in the second half of each year. In Europe, clothes dryers are sold more heavily in the winter. In Asia, with the exception of India, refrigerators tend to sell more heavily in summer, while demand for washers is greater in winter. In India, refrigerators and washers sell more frequently in the fall and winter months. Air conditioners are sold more heavily in the summer in Asia. In South America, refrigerators and room air conditioners sell more heavily in the second half of the year. Backlogs of the Company's products are filled and renewed relatively frequently in each year and are not significant in relation to the Company's annual sales. However, with respect to Asia, marked seasonality of certain product sales as noted above, combined with less efficient modes of distribution in that region, can result in significant inventory backlogs. 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, which is incorporated herein by reference. Customer-sponsored research activities relating to the development of new products, services or techniques, or the improvement of existing products, services, or techniques are not material. 6
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. These laws are continually changing and, as a general matter, are becoming more restrictive. The Company's policy is to comply with all such laws and regulations. The Company believes that it is in compliance in all material respects with all presently applicable federal, state, local, and other provisions relating to environmental protection in the countries in which it has manufacturing operations. Capital expenditures and expenses attributable to compliance with such provisions worldwide amounted to approximately $78 million in 1994, $58 million in 1995 and $50 million in 1996. The Company anticipates that such capital expenditures and expenses will aggregate approximately $52 million in 1997. Much of the decrease from 1994 to 1996 is attributable to the phaseout of CFCs and is associated with the elimination of taxes on chloroflourocarbons ("CFCs") (which were eliminated from the Company's products in the United States prior to December 31, 1995). The Company is using a global environmental management process to assist in achieving its goals of producing environmentally compatible products, better integrating environmental considerations into the Company's product design and employee training, improving the Company's ability to report and monitor its management of environmental, health and safety affairs, and reducing its worldwide emissions of certain chemicals. The entire United States home appliance industry, including the Company, must contend with adoption of stricter governmental energy and environmental standards to be phased in over the next several years. These include the general phaseout of CFCs used in refrigeration and energy standards rulemakings for other selected major appliances produced by the Company. Enactment of Federal energy standards is uncertain at this time due to funding and rulemaking restrictions being considered for the Department of Energy by the U.S. Congress. Compliance with these various standards as they become effective will require some product redesign. In Europe, the Company met the December 31, 1994 deadline for the elimination of CFCs in its products. As in the United States, Whirlpool Europe is also dealing with anticipated regulations and rules regarding improved efficiency and energy usage for its products. The Company believes it is well positioned to field products that comply with these anticipated regulations. In most Asian countries, the Company has until 2010 to eliminate CFCs from its products. Whirlpool's Asian operations are also well positioned to meet anticipated efficiency and energy usage regulations. The Company has been notified by state and federal environmental protection agencies of its possible involvement in a number of so-called "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. The Company has completed environmental assessments of its European facilities acquired as a result of the Company's purchase of the Major Domestic Appliance division of Philips. 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. The Company is also in the process of evaluating several recently acquired facilities in India and China. The Company does not presently anticipate any material adverse effect upon the Company's earnings or financial condition from the environmental condition of these facilities. 7
The following table sets forth the names of the Company's executive officers at December 31, 1996, the positions and offices with the Company held by them at such date, the year they first became officers, and their ages at December 31, 1996: <TABLE> <CAPTION> FIRST BECAME NAME OFFICE AN OFFICER AGE ---- ------ ------------ --- <S> <C> <C> <C> David R. Whitwam Director, Chairman of the 1983 54 Board and Chief Executive Officer William D. Marohn Director, President and 1984 56 Chief Operating Officer John P. Cunningham Executive Vice President 1995 59 and Chief Financial Officer Jeff M. Fettig Executive Vice President 1993 39 Ralph F. Hake Executive Vice President 1988 47 Robert D. Hall Executive Vice President 1992 48 Ronald L. Kerber Executive Vice President 1991 53 P. Daniel Miller Executive Vice President 1991 47 </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 1997 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: <TABLE> <CAPTION> NAME COMPANY/POSITION PERIOD ---- ---------------- ------ <S> <C> <C> John P. Maytag Corporation 1/94 through 12/95 Cunningham Chief Financial Officer 12/66 through 12/93 IBM Vice President and Assistant General Manager-- Main Frame Division (last title held) </TABLE> ITEM 2. PROPERTIES. The principal executive offices of Whirlpool Corporation are located in Benton Harbor, Michigan. At December 31, 1996, the principal manufacturing and service operations of the Company were carried on at 32 locations worldwide, 20 of which are located in 10 countries outside the United States. The Company occupied a total of approximately 35 million square feet devoted to manufacturing, service, administrative offices, warehouse, distribution, and sales space. Over 10 million square feet of such space is occupied under lease. In general, all such facilities are well maintained, suitable equipped, and in good operating condition. In 1996, manufacturing plants in Tulsa, Oklahoma, and Greenville, Ohio, were completed and became fully operational. ITEM 3. LEGAL PROCEEDINGS. As of, and during the quarter ended, December 31, 1996, 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 1996. 8
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock is traded on the New York Stock Exchange, the Chicago Stock Exchange, and the London Stock Exchange. At March 3, 1997, the number of holders of record of the Company's common stock was approximately 10,904. High and low sales prices (as reported on the New York Stock Exchange composite tape) and cash dividends declared and paid for the Company's common stock for each quarter during the years 1995 and 1996 are set forth in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report, which is herein incorporated by reference. In December 1996, Whirlpool Financial Corporation issued 250,000 shares of Series C redeemable cumulative preferred stock for an initial price of $100 per share. Goldman, Sachs & Co. ("Goldman") was the initial purchaser of all of the shares of the Series C preferred stock and such shares were purchased by Goldman and sold by the Company pursuant to a purchase agreement (the "Purchase Agreement") between Goldman and the Company. Pursuant to the terms and conditions of the Purchase Agreement, Goldman made the representation that it was purchasing the Series C shares in reliance on Rule 144A under the Securities Act and that any resale of such Series C shares would be made to institutional "accredited investors" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Act (Regulation D)). Goldman received $218,750 in fees, deducted from the offering proceeds, for its services in connection with the issuance of the Series C preferred Stock. ITEM 6. SELECTED FINANCIAL DATA. The selected financial data for the five years ended December 31, 1996 with respect to the following line items shown under the "Eleven Year Consolidated Statistical Review" in the Annual Report is incorporated herein by reference and made a part of this report: Total revenues; earnings from continuing operations before accounting change; earnings from continuing operations before accounting change per share of common stock; dividends paid 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, and earnings of foreign affiliates. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Management's Discussion and Analysis of Results of Operations and Financial Condition in the Annual Report is incorporated herein by reference and made a part of this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company in the Annual Report are incorporated herein by reference and made a part of this report. Supplementary financial information regarding quarterly results of operations (unaudited) for the years ended December 31, 1996 and 1995 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. 9
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information with respect to directors of the Company is incorporated herein by reference to the information under the caption "Directors and Nominees for Election as Directors" in the Company's proxy statement for the 1997 annual meeting of stockholders (SEC File No. 1-3932) (the "Proxy Statement"). Information with respect to executive officers of the Company is set forth in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION. Information with respect to compensation of executive officers and directors of the Company is incorporated herein by reference to the information under the captions "Executive Compensation" and "Compensation of Directors" in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP. Information with respect to security ownership by the only person(s) known to the Company to beneficially own more than 5 percent of the Company's stock and by each director of the Company and all directors and elected officers of the Company as a group is incorporated herein by reference to the information under the caption "Security Ownership" in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 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 Schedules." 2. The financial statement schedule listed in the "Index to Financial Statements and Financial Statement Schedules." 3. The exhibits listed in the "Index to Exhibits." (b) Reports on Form 8-K filed during the fourth quarter of 1996. 1. None. (c) Exhibits. 1. The following exhibits are included herein: (11) Computation of per share earnings. (12) Computation of the ratios of earnings to fixed charges. (27) Financial Data Schedule. (99) Audited Consolidated Financial Statements of Multibras S.A. Electrodomesticos and subsidiaries. 2. The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules. The response to this portion of Item 14 is submitted as a separate section of this report. 10
SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 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) /s/ John P. Cunningham By: _________________________________ John P. Cunningham(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. <TABLE> <CAPTION> SIGNATURE TITLE DATE --------- ----- ---- <S> <C> <C> David R. Whitwam* Director, Chairman of the ____________________________________ Board and Chief Executive David R. Whitwam Officer (Principal Executive Officer) William D. Marohn* Director, and Vice Chairman ____________________________________ of the Board William D. Marohn John P. Cunningham* Executive Vice President and ____________________________________ Chief Financial Officer John P. Cunningham (Principal Financial Officer) Robert G. Thompson* Vice President and ____________________________________ Controller (Principal Robert G. Thompson Accounting Officer) Robert A. Burnett* Director ____________________________________ Robert A. Burnett Herman Cain* Director ____________________________________ Herman Cain Allan D. Gilmour* Director ____________________________________ Allan D. Gilmour March 21, 1997 Kathleen J. Hempel* Director ____________________________________ Kathleen J. Hempel Arnold G. Langbo* Director ____________________________________ Arnold G. Langbo Miles L. Marsh* Director ____________________________________ Miles L. Marsh Philip L. Smith* Director ____________________________________ Philip L. Smith Paul G. Stern* Director ____________________________________ Paul G. Stern Janice D. Stoney* Director ____________________________________ Janice D. Stoney </TABLE> /s/ Daniel F. Hopp Attorney-in-Fact *By: __________________________ Daniel F. Hopp 11
ANNUAL REPORT ON FORM 10-K ITEMS 14(A) (1) AND (2) AND 14(D) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE(S) YEAR ENDED DECEMBER 31, 1996 WHIRLPOOL CORPORATION AND CONSOLIDATED SUBSIDIARIES The following consolidated financial statements of the registrant and its consolidated subsidiaries, set forth in the Annual Report, are incorporate herein by reference in Item 8: Consolidated balance sheets--December 31, 1996 and 1995 Consolidated statements of earnings--Three years ended December 31, 1996 Consolidated statements of cash flows--Three years ended December 31, 1996 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, Independent Auditors........................ F-2 Reports of Price Waterhouse, Independent Auditors.................... F-3 Schedule II--Valuation and Qualifying Accounts....................... F-9 The following exhibits are included herein: Exhibit 11--Computation of Earnings Per Share........................ F-10 Exhibit 12--Ratio of Earnings to Fixed Charges....................... F-11 Exhibit 99--Audited Consolidated Financial Statements of Multibras S.A. Electrodomesticos and Subsidiaries as of and for the Years Ended December 31, 1996 and 1995............................................................ F-13 </TABLE> Individual financial statements of the registrant's affiliated foreign companies, other than affiliated Brazilian companies, accounted for by the equity method, have been omitted since no such company individually constitutes a significant subsidiary. Summarized financial information relating to the affiliated companies is set forth in Note 5 of the Notes to Consolidated Financial Statements incorporated by reference herein. 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
[LETTERHEAD ERNST & YOUNG LLP] REPORT OF INDEPENDENT AUDITORS The Stockholders and Board of Directors Whirlpool Corporation Benton Harbor, Michigan We have audited the consolidated financial statements of Whirlpool Corporation listed in the Index at Item 14(a)(1) of the annual report on Form 10-K of Whirlpool Corporation for the year ended December 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and schedule are the responsibility of Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We did not audit the financial statements of the Brazilian affiliates used as the basis for recording the Company's equity in their net earnings, as presented in Note 5 to the consolidated financial statements. The financial statements of those affiliates were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amount included for the Brazilian affiliates, is based on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. 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 that our audits and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Whirlpool Corporation at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 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. [LOGO SIGNATURE Ernst & Young LLP] Chicago, Illinois January 20, 1997 F-2
REPORT OF INDEPENDENT ACCOUNTANTS January 22, 1997 To the Board of Directors and Stockholders Brasmotor S.A. We have audited the accompanying consolidated balance sheets of Brasmotor S.A. and its subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of earnings, of movement in stockholders' equity and of cash flows for the years then ended, expressed in U.S. dollars. Such audits were made in conjunction with our audits of the financial statements expressed in local currency on which we issued an unqualified opinion dated January 22, 1997. 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 did not audit the financial statements of Whirlpool Argentina S.A. used as the basis for recording the Company's equity in its net earnings, as presented in Note 4 to the consolidated financial statements. The financial statements of that affiliate were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Whirlpool Argentina S.A. (Note 4), is based solely on the reports of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 that our audits provide a reasonable basis for our opinion. As stated in Note 1, Whirlpool Corporation has prescribed that accounting principles generally accepted in the United States of America be applied in the preparation of the consolidated financial statements of Brasmotor S.A. and its subsidiaries to be included in Whirlpool's consolidated financial statements. Brazil has a highly inflationary economy. Accounting principles generally accepted in the United States of America require that financial statements of a company denominated in the currency of a country with a highly inflationary economy be remeasured into a more stable currency unit for purposes of consolidation. Accordingly, the accounts of Brasmotor S.A. and its Brazilian subsidiaries, which are maintained in reais, were remeasured and adjusted into U.S. dollars for the financial statements prepared in accordance with accounting principles generally accepted in the United States of America on the bases stated in Note 1. F-3
In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements expressed in U.S. dollars audited by us are presented fairly, in all material respects, on the bases stated in Note 1 and discussed in the preceding paragraph. Price Waterhouse Auditors Independents CRC 2SP000160/O-5 Carlos Roberto Asciutti Partner Contador CRC 1SP145670/O-1 F-4
REPORT OF INDEPENDENT ACCOUNTANTS January 22, 1997 To the Board of Directors and Stockholders Empresa Brasileira de Compressores S.A.--EMBRACO We have audited the accompanying consolidated balance sheets of Empresa Brasileira de Compressores S.A.--EMBRACO and its subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of earnings, of movement in stockholders' equity and of cash flows for the years then ended, expressed in U.S. dollars. Such audits were made in conjunction with our audits of the financial statements expressed in local currency on which we issued an unqualified opinion dated January 22, 1997. 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 of America. 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 that our audits provide a reasonable basis for our opinion. As stated in Note 1, Whirlpool Corporation has prescribed that accounting principles generally accepted in the United States of America be applied in the preparation of the consolidated financial statements of Empresa Brasileira de Compressores S.A.--EMBRACO and its subsidiaries to be included in Whirlpool's consolidated financial statements. Brazil has a highly inflationary economy. Accounting principles generally accepted in the United States of America require that financial statements of a company denominated in the currency of a country with a highly inflationary economy be remeasured into a more stable currency unit for purposes of consolidation. Accordingly, the accounts of Empresa Brasileira de Compressores S.A.--EMBRACO and its Brazilian subsidiaries, which are maintained in reais, were remeasured and adjusted into U.S. dollars, for the purpose of the financial statements prepared in accordance with accounting principles generally accepted in the United States of America on the bases stated in Note 1. F-5
In our opinion, the consolidated financial statements expressed in U.S. dollars audited by us are presented fairly, in all material respects, on the bases stated in Note 1 and discussed in the preceding paragraph. Price Waterhouse Auditores Independentes CRC 2SP000160/O-5 "S" SC Carlos Roberto Asciutti Partner Contador CRC 1SP145670/O-1 "S" SC F-6
REPORT OF INDEPENDENT ACCOUNTANTS January 22, 1997 To the Board of Directors and Stockholders Multibras S.A. Electrodomesticos We have audited the accompanying consolidated balance sheets of Multibras S.A. Eletrodomesticos and its subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of earnings, of movement in stockholders' equity and of cash flows for the years then ended, expressed in U.S. dollars. Such audits were made in conjunction with our audits of the financial statements expressed in local currency on which we issued an unqualified opinion dated January 22, 1997. 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 of America. 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 that our audits provide a reasonable basis for our opinion. As stated in Note 1, Whirlpool Corporation has prescribed that accounting principles generally accepted in the United States of America be applied in the preparation of the consolidated financial statements of Multibras S.A. Eletrodomesticos and its subsidiaries to be included in Whirlpool's consolidated financial statements. Brazil has a highly inflationary economy. Accounting principles generally accepted in the United States of America require that financial statements of a company denominated in the currency of a country with a highly inflationary economy be remeasured into a more stable currency unit for purposes of consolidation. Accordingly, the accounts of Multibras S.A. Eletrodomesticos and its Brazilian subsidiaries, which are maintained in reais, were remeasured and adjusted into U.S. dollars for the financial statements prepared in accordance with accounting principles generally accepted in the United States of America on the basics stated in Note 1. F-7
In our opinion, the consolidated financial statements expressed in U.S. dollars audited by us are presented fairly, in all material respects, on the bases stated in Note 1 and discussed in the preceding paragraph. Price Waterhouse Auditores Independentes CRC 2SP000160/O-5 Carlos Roberto Asciutti Partner Contador CRC ISP145670/O-1 F-8
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS WHIRLPOOL CORPORATION AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994 (MILLIONS OF DOLLARS) <TABLE> <CAPTION> COL. A COL. B COL. C COL. D COL. E ------ --------- ------------------- ------------ ------- ADDITIONS ------------------- (1) (2) BALANCE CHARGED CHARGED BALANCE AT TO COSTS TO OTHER AT END BEGINNING AND ACCOUNTS-- DEDUCTIONS-- OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD ----------- --------- -------- ---------- ------------ ------- <S> <C> <C> <C> <C> <C> Year Ended December 31, 1996: Allowances for doubtful accounts--trade receivables.............. $ 39 $ 15 $ 9(A) $ 45 ==== ==== ==== ==== Allowances for doubtful accounts--financing receivables and leases... $ 42 $ 48 $ 40(B) $ 50 ==== ==== ==== ==== Accrued expenses-- restructuring costs...... $ 70 $ 30 $ 68(C) $ 32 ==== ==== ==== ==== Year Ended December 31, 1995: Allowances for doubtful accounts--trade receivables.............. $ 38 $ 16 $ 15(A) $ 39 ==== ==== ==== ==== Allowances for doubtful accounts--financing receivables and leases... $ 46 $ 34 $ 38(B) $ 42 ==== ==== ==== ==== Accrued expenses-- restructuring costs...... $175 $-- $105(C) $ 70 ==== ==== ==== ==== Year Ended December 31, 1994: Allowances for doubtful accounts--trade receivables.............. $ 36 $ 13 $ 11(A) $ 38 ==== ==== ==== ==== Allowances for doubtful accounts--financing receivables and leases... $ 49 $ 22 $ 25(B) $ 46 ==== ==== ==== ==== Accrued expenses-- restructuring costs...... $ 33 $250 $108(C) $175 ==== ==== ==== ==== </TABLE> - - -------- Note A--The amounts represent accounts charged off, less recoveries of $7 in 1996, $5 in 1995 and $1 in 1994, and translation adjustments. Note B--The amounts represent accounts charged off, less recoveries of $3 in 1996 and 1995 and $2 in 1994. Note C--Includes cash payments for employee severance and related costs, lease terminations, facility dispositions and other cash costs; write-down of facilities, equipment and other assets; and translation adjustments. F-9
EXHIBIT 11--COMPUTATION OF EARNINGS PER SHARE WHIRLPOOL CORPORATION AND SUBSIDIARIES (ALL AMOUNTS IN MILLIONS EXCEPT EARNINGS PER SHARE) <TABLE> <CAPTION> 1996 1995 1994 ------ ------ ------ <S> <C> <C> <C> Primary: Average Shares Outstanding............................... 74.3 73.9 74.2 Treasury Stock Method (a): Stock Options.......................................... 0.5 0.6 1.0 Restricted Stock....................................... 0.3 0.3 0.3 ------ ------ ------ Average Shares Outstanding............................... 75.1 74.8 75.5 ====== ====== ====== Net Earnings............................................. $155.8 $209.4 $158.3 ====== ====== ====== Earnings Per Share....................................... $ 2.08 $ 2.80 $ 2.10 ====== ====== ====== Fully Diluted: Average Shares Outstanding............................... 74.3 73.9 74.2 Treasury Stock Method (b): Stock Options.......................................... 0.6 0.9 1.2 Restricted Stock....................................... 0.3 0.3 0.3 Assumed Conversion of Debt............................... 2.2 2.2 2.2 ------ ------ ------ Average Shares Outstanding................................. 77.4 77.3 77.9 ====== ====== ====== Net Earnings............................................. $155.8 $209.4 $158.3 Interest Expense, or Convertible Debt, net of tax........ 4.5 4.2 4.3 ------ ------ ------ Fully Diluted Net Earnings............................... $160.3 $213.6 $162.6 ====== ====== ====== Earnings Per Share....................................... $ 2.07 $ 2.76 $ 2.09 ====== ====== ====== </TABLE> - - -------- (a) Using the average market price per share of stock for the period. (b) Using the greater of the average market price per share of stock for the period or the market price per share of stock at the end of the period. F-10
EXHIBIT 12--RATIO OF EARNINGS TO FIXED CHARGES WHIRLPOOL CORPORATION AND SUBSIDIARIES <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1995 ------------------------------- APPLIANCE FINANCIAL WHIRLPOOL BUSINESS SERVICES CORPORATION --------- --------- ----------- (MILLIONS OF DOLLARS) <S> <C> <C> <C> Pretax earnings................................ $214.0 $ 28 $242 Portion of rents representative of the interest factor........................................ 21 1 22 Interest on indebtedness....................... 128 79 207 Amortization of debt expense and premium....... 1 -- 1 WFC preferred stock dividend................... -- 4 4 ------ ---- ---- Adjusted income................................ $ 364 $112 $476 ====== ==== ==== <CAPTION> FIXED CHARGES - - ------------- <S> <C> <C> <C> Portion of rents representative of the interest factor........................................ $ 21 $ 1 $ 22 Interest on indebtedness....................... 128 79 207 Amortization of debt expense and premium....... 1 -- 1 WFC preferred stock dividend................... -- 4 4 ------ ---- ---- $ 150 $ 84 $234 ====== ==== ==== Ratio of earnings to fixed charges............. 2.4 1.3 2.0 ====== ==== ==== </TABLE> F-11
EXHIBIT 12--RATIO OF EARNINGS TO FIXED CHARGES WHIRLPOOL CORPORATION AND SUBSIDIARIES <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, 1996 ------------------------------- APPLIANCE FINANCIAL WHIRLPOOL BUSINESS SERVICES CORPORATION --------- --------- ----------- (MILLIONS OF DOLLARS) <S> <C> <C> <C> Pretax earnings................................ $100 $ 30 $130 Portion of rents representative of the interest factor........................................ 17 1 18 Interest on indebtedness....................... 154 81 235 Amortization of debt expense and premium....... 1 -- 1 WFC preferred stock dividend................... -- 4 4 ---- ---- ---- Adjusted income................................ $272 $116 $388 ==== ==== ==== <CAPTION> FIXED CHARGES - - ------------- <S> <C> <C> <C> Portion of rents representative of the interest factor........................................ $ 17 $ 1 $ 18 Interest on indebtedness....................... 154 81 235 Amortization of debt expense and premium....... 1 -- 1 WFC preferred stock dividend................... -- 4 4 ---- ---- ---- $172 $ 86 $258 ==== ==== ==== Ratio of earnings to fixed charges............. 1.6 1.3 1.5 ==== ==== ==== </TABLE> F-12
EXHIBIT 99 Multibras S.A. Eletrodomesticos and Its Subsidiaries Consolidated Financial Statements at December 31, 1996 and 1995 and Report of Independent Accountants F-13
Multibras S.A. Eletrodomesticos and its subsidiaries Consolidated Balance Sheet at December 31 In thousands of U.S. dollars - - -------------------------------------------------------------------------------- <TABLE> <CAPTION> Assets 1996 1995 --------- --------- <S> <C> <C> Current assets Cash and equivalents 524,740 350,961 Trade receivables 308,120 243,557 Inventories 300,664 237,112 Other assets 87,775 73,588 --------- --------- 1,221,299 905,218 --------- --------- Non-current assets Deferred income taxes 59,150 37,387 Intangibles, net 11,414 12,528 Investments in affiliated companies 36,920 33,073 Sundry investments and other assets 35,772 32,479 --------- --------- 143,256 115,467 --------- --------- Property, plant and equipment 606,604 554,364 --------- --------- 1,971,159 1,575,049 ========= ========= </TABLE> <TABLE> <CAPTION> Liabilities 1996 1995 --------- --------- <S> <C> <C> Current liabilities Short-term debt 265,789 203,158 Accounts payable 156,317 152,844 Employee compensation 71,672 62,534 Income taxes 51,452 25,405 Product warranty 24,032 16,326 Other taxes payable 43,947 22,546 Other accrued expenses 53,268 28,822 Dividends 37,669 16,865 --------- --------- 704,146 528,500 --------- --------- Long-term liabilities Long-term debt 182,447 172,483 Deferred income taxes 25,720 24,590 Employees' severance benefits 44,210 27,613 Other liabilities 27,888 33,342 --------- --------- 280,265 258,028 --------- --------- Commitments and contingencies (Note 10) Minority interests 161,717 145,040 --------- --------- Stockholders' equity Capital stock 431,230 429,038 Retained earnings 393,801 214,443 --------- --------- 825,031 643,481 --------- --------- 1,971,159 1,575,049 ========= ========= </TABLE> The accompanying notes are an integral part of these consolidated financial statements. F-14
<TABLE> <CAPTION> Multibras S.A. Eletrodomesticos and its subsidiaries Consolidated Statement of Earnings Years Ended December 31 In thousands of U.S. dollars (except per-share amounts) - - -------------------------------------------------------------------------------------------- 1996 1995 ---------- ----------- <S> <C> <C> Net sales 2,528,327 2,138,389 Cost of products sold (1,786,359) (1,609,597) Selling and administrative expenses (418,000) (358,633) --------- --------- Operating profit 323,968 170,159 --------- --------- Interest expense (38,338) (64,819) Export incentive credits 38,547 Interest income and other, net 50,055 87,788 --------- --------- 11,717 61,516 --------- --------- Earnings before tax, equity earnings and minority interest 335,685 231,675 Income taxes Current (118,786) (71,891) Deferred 22,345 (2,664) Tax incentives 17,026 15,026 --------- --------- Income before equity earnings and minority interest 256,270 172,146 Equity in earnings of affiliated companies 6,307 6,638 Minority interest (19,429) (30,517) --------- --------- Net earnings 243,148 148,267 ========= ========= Earnings per thousand shares - US$ 220.79 134.63 ========= ========= </TABLE> The accompanying notes are an integral part of these consolidated financial statements. F-15
Multibras S.A. Eletrodomesticos Statement of Movement in Stockholders' Equity In thousands of U.S. dollars (except per-share amounts) - - -------------------------------------------------------------------------------- <TABLE> <CAPTION> Retained Capital stock earnings ------------- ------------- <S> <C> <C> At December 31, 1994 429,038 93,084 Net earnings for the year 148,267 Dividends Interim (US$ 12.73 per thousand shares) (14,023) Final (US$ 11.70 per thousand shares) (12,885) ------------- ------------- At December 31, 1995 429,038 214,443 Capitalization of retained earnings 2,192 (2,192) Net earnings for the year 243,148 Dividends Interim (US$ 23.23 per thousand shares) (25,578) Final (US$ 32.71 per thousand shares) (36,020) ------------- ------------- At December 31, 1996 431,230 393,801 ============= ============= </TABLE> The accompanying notes are an integral part of these consolidated financial statements. F-16
Multibras S.A. Eletrodomesticos and its subsidiaries Consolidated Statement of Cash Flows Years Ended December 31 In thousands of U.S. dollars - - -------------------------------------------------------------------------------- <TABLE> <CAPTION> 1996 1995 ------- ------- <S> <C> <C> Cash flows from operating activities: Net earnings for the year 243,148 148,267 ------- ------- Adjustments to reconcile net earnings to net cash provided by operating activities: Loss on translation 12,369 11,288 Equity in net earnings of affiliated companies, less dividends received (4,320) (4,191) Depreciation and amortization 97,449 81,463 Gain on sale of property, plant and equipment and investments (5,818) (862) Foreign exchange gain (4,637) (5,586) Deferred income tax (22,345) 2,664 Minority interests 19,429 30,517 ------- ------- 92,127 115,293 ------- ------- Changes in assets and liabilities, net of effects of business acquisitions and dispositions: Trade receivables (82,906) (128,182) Inventories (63,552) (82,843) Other assets (19,552) (30,313) Long-term assets 9,796 7,917 Accounts payable 13,752 47,221 Other payables and accruals 101,011 94,882 ------- ------- (41,451) (91,318) ------- ------- Total adjustments 50,676 23,975 Net cash provided by operating activities 293,824 172,242 ------- ------- </TABLE> F-17
<TABLE> <CAPTION> Multibras S.A. Eletrodomesticos and its subsidiaries Consolidated Statement of Cash Flows Years Ended December 31 In thousands of U.S. dollars (continued) - - ------------------------------------------------------------------------------------------- 1996 1995 -------- -------- <S> <C> <C> Cash flows from investing activities: Proceeds from sale of property, plant and equipment and investments and other long-term assets disposals 26,867 15,267 Net additions to property, plant and equipment (157,918) (134,558) Increase in investments in affiliated companies and sundry investments, including goodwill (19,328) (671) -------- -------- Net cash used in investing activities (150,379) (119,962) -------- -------- Cash flows from financing activities: Short-term debt 78,223 133,536 Net increase in long-term debt 21,765 55,940 Dividends paid (38,463) (30,966) Dividends to minority interests (6,069) (3,520) Increase in minority interests 986 13,919 -------- -------- Net cash provided by financing activities 56,442 168,909 -------- -------- Effect of exchange rate changes on cash (26,108) (65,243) Net increase in cash and equivalents 173,779 155,946 Cash and equivalents at beginning of year 350,961 195,015 -------- -------- Cash and equivalents at end of year 524,740 350,961 ======== ======== Supplemental disclosures of cash flow information Cash paid during the year for Interest 27,330 21,189 Income taxes 67,465 37,844 </TABLE> The accompanying notes are an integral part of these consolidated financial statements F-18
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated ------------------------------------------------------------------------ 1 Summary of Principal Accounting Policies (a) Nature of operations The Company is the leading Brazilian manufacturer and marketer of home appliances. The majority of its production is sold in the local market. The Company was formed in 1994 as a result of the merger of three companies under common control with consolidated assets of US$ 1,176,441, net sales of US$ 1,506,299 and net earnings of US$ 135,729 at, and for the year ended, December 31, 1994. (b) Bases of consolidation The consolidated financial statements include the financial statements of Multibras S.A. Eletrodomesticos and all majority-owned subsidiaries. Investments in affiliated companies are accounted for by the equity method. All intercompany receivables and payables, revenues and expenses, unrealized profits and losses and investments in directly or indirectly owned subsidiary companies have been eliminated. The amounts of net earnings and stockholders' equity attributed to minority stockholders are separately stated in the financial statements. (c) Bases of adjustment and remeasurement into U.S. dollars The Company is incorporated in Brazil and its books and records and those of its Brazilian subsidiaries are kept in reais and in accordance with Brazilian generally accepted accounting principles. The financial statements expressed in U.S. dollars conform with accounting principles generally accepted in the United States of America and reflect the adjustment and remeasurement into U.S. dollars on the bases set out in (i) and (ii) below: (i) Adjustments The following principal adjustments have been reflected in the U.S. dollar financial statements: . Present value adjustment of short-term receivables and payables. . Interest incurred on financing of property, plant and equipment under construction is capitalized in accordance with FAS 34. . Income taxes are accounted for in accordance with FAS 109. . Pension expense is recognized in accordance with FAS 87. F-19
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated - - -------------------------------------------------------------------------------- (ii) Remeasurement Operations in hyperinflationary economy - Brazil The basis of remeasurement of local currency into U.S. dollars is summarized as follows: <TABLE> Basis of remeasurement ---------------------- <S> <C> Inventories, intangibles, investments in affiliated Historical exchange rates companies, sundry investments, property, plant and equipment, accumulated depreciation, capital stock and retained earnings All other assets and liabilities Closing exchange rate of R$ 1,0395 (1995 - R$ 0.9726) per US$ 1 Income and expense, except for cost of products Accumulation of the monthly operations, sold, depreciation, amortization, and equity in each translated at the respective month- earnings of affiliated companies, which are at end exchange rate, resulting in an individual historical rates weighted average exchange rate for each income and expense </TABLE> Price-level restatements, which were required to be recorded in the local books up to December 31, 1995 to partially recognize the effects of inflation, do not receive a U.S. dollar equivalent on remeasurement, except insofar as the price-level restatements affect the computation of income taxes. Had the undistributed retained earnings reflected in the official accounting records at December 31, 1996 and 1995 of R$ 322.711 thousand and R$ 153.623 thousand (shown in the accompanying financial statements at US$ 393.801 and US$ 214,443), been expressed in U.S. currency at the prevailing exchange rate on those dates, the amounts thereof would have been US$ 310.448 and US$ 157.951. The resulting remeasurement gains and losses are classified in the statement of earnings as detailed in Note 12. Operations in non-hyperinflationary economies - foreign <TABLE> <S> <C> Balance sheet items Closing exchange rate Income and expenses Exchange rate prevailing at the time income is earned and expense is incurred Translation gains and losses are taken directly to equity. </TABLE> F-20
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated --------------------------------------------------------------------------- (d) Cash and equivalents Cash and equivalents are carried at cost plus interest and include highly liquid financial investments with original maturities of 90 days or less. (e) Trade receivables The Company makes substantial sales to a relatively small number of home appliance retailers, which operate nationally or regionally. Trade receivables are stated at estimated net realizable values. An allowance for uncollectible accounts is provided in an amount considered to be sufficient to meet probable future losses. (f) Inventories Inventories are stated at the lower of average cost of purchase or production, replacement cost or net realizable value. (g) Property, plant and equipment Property, plant and equipment are stated at cost. Depreciation is computed on the straight-line method, over the estimated useful lives of the various classes of assets. Expenditures for maintenance and repairs are charged to income. Improvements and major renewals are capitalized. (h) Recoverability of long-lived assets On an annual basis or more frequently if circumstances require, the Company evaluates long-lived assets, including property, plant and equipment, investments and intangibles, against current and estimated undiscounted future operating income of the related businesses. No impairment losses have been recorded for any of the periods presented. Write-down of the carrying value of assets or groups of assets will be made, if appropriate. (i) Current and long-term liabilities These are adjusted for the effects of indexation or exchange rate fluctuations on the basis of the contractually agreed indexes or rates, when applicable. (j) Product warranty Provision is made currently for estimated product warranty costs, based on past experience and future expected commitments. F-21
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated ----------------------------------------------------------------------- (k) Revenue and expense recognition Sales revenues are recognized when products are shipped or services are rendered. Expenses and costs are recognized on the accrual basis. (l) Income taxes (i) Under the terms of the Government International Trade Authority (BEFIEX) fiscal incentive program, which expires in 1998, earnings from qualified export sales are subject to income tax at the rate of 6%, in the proportion that those export sales bear to total Company sales. That part of earnings not deemed, on this basis, to be eligible for a reduced tax rate is subject to income tax at the standard statutory rate. The Company also records accelerated depreciation on certain plant and equipment for tax purposes only. (ii) Pursuant to FAS 109 "Accounting for Income Taxes" the net tax charges or benefits related to (i) tax loss carryforwards available to be offset against future taxable income and (ii) tax effects of temporary differences between tax results and financial reporting results, excluding the effects of indexation recorded for tax purposes and changes in exchange rates, are recorded at the enacted tax rates at each balance sheet date. (iii) Income taxes are recorded gross of tax incentive investments and subsequently reduced by the amount of incentive investment deposits when received. (m) Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates . <TABLE> <CAPTION> 2 Trade receivables 1996 1995 ------- ------- <S> <C> <C> Trade receivables 442,476 354,202 Trade receivables sold with recourse (78,718) (73,614) Allowance for doubtful accounts (55,638) (37,031) ------- ------- 308,120 243,557 -------- ------- </TABLE> F-22
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated --------------------------------------------------------------------------- 3 Inventories <TABLE> <CAPTION> 1996 1995 ------------------- <S> <C> <C> Finished products and work in progress 128,736 79,261 Raw materials and others 171,928 157,851 ------------------- 300,664 237,112 ------------------- </TABLE> 4 Investments in affiliated companies (i) The Company has direct voting interests of 36% in Multibras da Amazonia S.A., 50% in each of Sabrico Utilidades Domesticas Ltda. and Consorcio Nacional Brastemp Sabrico S/C Ltda., and other companies engaged in the manufacture of home appliances or related components. (ii) In February 1995, the subsidiary company Empresa Brasileira de Compressores S.A. - EMBRACO entered into a joint venture to produce compressors in China. The subsidiary is the majority partner of the joint venture with an interest of 52%. As of December 31, 1996, US$13,807 was invested as capital in the joint venture. The other partners in this joint venture are Whirlpool Overseas Holdings Corporation (8%) and Beijing Snowflake Eletric Appliance Group Corporation (40%). (iii)In September, 1996, the investment in Motores Eletricos Brasil S.A. was sold to a third party for US$22,026. 5 Property, plant and equipment <TABLE> <CAPTION> Annual depreciation 1996 1995 rate% -------------------------------------- <S> <C> <C> <C> Land 10,993 11,171 Buildings 165,422 156,115 4 Machinery, equipment and installations 794,830 729,037 10 to 40 Molds and tools 114,231 114,325 10 to 20 Furniture and fixtures 41,124 42,198 10 to 20 Other 36,771 38,236 6 to 20 --------------------- 1,163,371 1,091,082 Accumulated depreciation and amortization (680,309) (606,390) --------------------- 483,062 484,692 Plant and equipment - investments in progress 110,458 64,100 Advances to suppliers 13,084 5,572 --------------------- 606,604 554,364 --------------------- </TABLE> Property, plant and equipment of US$3,709 are pledged in guarantee of borrowings. F-23
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated -------------------------------------------------------------------------- 6 Debt <TABLE> <CAPTION> Interest 1996 1995 ----------------------- -------------------------------- <S> <C> <C> <C> Local currency loans - Monetary correction plus Brazil interest of 12% p.a. 74,546 35,165 Foreign currency loans . U.S. dollars Interest from 8 to 12,4% p.a. 290,075 229,716 . Italian lire RIBOR plus 1.25% p.a. 83,615 110,760 -------------------------------- 448,236 375,641 Current portion (265,789) (203,158) -------------------------------- Long-term portion 182,447 172,483 -------------------------------- </TABLE> At December 31, 1996, the long-term portion of total long-term debt matures in the following years: <TABLE> <S> <C> <C> 1998 51,629 1999 90,385 2000 27,210 2001 10,475 Thereafter 2,748 -------------------------------- 182,447 --------------------------------- </TABLE> 7 Income Tax (a) Tax rate Income taxes in Brazil include Federal income tax and social contribution (which is an additional Federal tax on income). There are no State or local income taxes in Brazil. The statutory rates applicable in each year presented were as follows (in percentage): <TABLE> <CAPTION> 1996 1995 -------------------------------- <S> <C> <C> Federal income tax 25% 43% Social contribution 8% 10% Adjustment to composite rate (2%) (5%) -------------------------------- Composite Federal income tax rate 31% 48% -------------------------------- </TABLE> The social contribution is deductible both for Federal income tax and social contribution purposes. F-24
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated -------------------------------------------------------------------------- (b) Income tax reconciliation The amount reported as income tax expense or benefit is reconciled to the statutory rates as follows: <TABLE> <CAPTION> 1996 1995 --------- --------- <S> <C> <C> Earnings before income tax, equity earnings and minority interest 335,685 231,675 Tax charge at statutory rates 104,062 111,204 Adjustments to derive effective rate: Effects of change in tax rates on deferred taxes. 5,826 Permanent differences 3,208 (8,028) Reduced tax rates on incetivated export sales (6,609) (12,447) Valuation allowance 3,536 1,194 Difference related to assets and liabilities remeasured at historical exchange rates that result from (i) changes in exchange rates and (ii) indexing used for Brazilian tax purposes (7,756) (23,194) --------- --------- Income taxes 96,441 74,555 --------- --------- </TABLE> (c) Deferred Income Taxes The deferred tax assets (liabilities) are comprised of the following: <TABLE> <CAPTION> 1996 1995 --------- --------- <S> <C> <C> Differences between the tax and the book basis of certain property, plant and equipment. (20,703) (20,378) Acelerated depreciation (6,794) (4,819) Temporary differences between Brazilian tax basis and US GAAP 7,306 1,977 Tax loss carryforwards 3,536 1,194 Allowances and accruals not currently deductible 47,439 25,850 Others 6,182 10,167 ---------- --------- 36,966 13,991 Valuation allowance (3,536) (1,194) --------- --------- 33,430 12,797 --------- --------- Assets 59,150 37,387 Liabilities (25,720) (24,590) --------- --------- 33,430 12,797 --------- --------- </TABLE> 8 Employees' Severance Benefits As required by Italian legislation, the subsidiary Embraco Europe SrL. accrues severance benefits equal to one month's salary for every year of service of each employee. 9 Stockholders' Equity Issued and fully-paid capital stock comprises 739,465,532 common shares and 361,804,950 preferred shares with no par value. The Company's statutes establish a minimum compulsory annual dividend of 25 % of net earnings for the year in local currency, adjusted in accordance with corporate legislation, subject to the minimum dividend priority of preferred stockholders. F-25
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated -------------------------------------------------------------------------- In the statutory financial statements, retained earnings include: (i) the tax incentive investments reserve, corresponding to that portion of the income tax liability applied in tax incentive investments; and (ii) the legal reserve which must be accumulated at the rate of 5% of the statutory net earnings until the reserve reaches 20% of capital stock in local currency. At December 31,1996 these restricted reserves totalled US$ 26,079. 10 Commitments and Contingencies (a) In 1989, a subsidiary initiated civil litigation contesting responsibility for the payment of loan principal amounting to approximately US$ 39,500. This loan, which did not have appropriate board approval, was allegedly authorized at that time by the then chief executive officer and, according to the financial institution, was drawn in the subsidiary's name, although the proceeds were never recorded by the subsidiary. Simultaneously with this legal action, a police inquiry was initiated at the subsidiary's request. In view of outside legal counsel's opinion that the chances of a favorable decision in respect of this matter are very high, management considers that no provision is necessary in respect thereof, and accordingly, no liability for this contingency is recorded in the financial statements. (b) Income tax returns for the last five years remain open to examination and final acceptance by the fiscal authorities. Other taxes are also open to review for varying periods. Management does not anticipate that any major assessments would arise in the event of an examination. (c) The Company and a subsidiary have signed a contract with BEFIEX under the terms of which they are committed to jointly export products with a value of US$ 1,987,000 and to make certain minimum capital expenditures during the ten-year period ending July 1998, in compensation for benefits relating to import and other taxes. In the event of failure to comply with these conditions, the Company and the subsidiary will be subject to the repayment of tax benefits previously obtained, plus interest and fine. Management expects that they will comply with these conditions. (d) In 1995, a subsidiary obtained a favorable decision in the law courts with respect to a legal claim relative to certain export incentives, which were eliminated by the government in 1989, in the amount of US$ 38,547. This amount was realized and recognized as income by the subsidiary in 1995. In September 1995, part of this amount was contested by the fiscal authorities. No provision has been recorded with respect to this claim as management, based on the opinion of its legal advisors, believes that the probability of any loss is remote. On December 16, 1996, a favorable decision was obtained by the Company and a subsidiary with respect to additional export incentives in connection with the BEFIEX program. The final implementation of such decision is dependent on the calculation of the amount involved and approval by the court. A reasonable estimation of the amount involved cannot be made at this time. 11 Related Party Transactions A subsidiary makes substantial sales to Whirpool Corporation, a significant shareholder of the Company, and its subsidiaries at normal prices and conditions. Accounts receivable from these companies totalled US$ 6,972 and US$ 6,306 at December 31, 1996 and 1995. F-26
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated --------------------------------------------------------------------------- 12 Gains and Losses on Remeasurement The gains and losses on translation have been reclassified to the related line items in the statement of earnings as follows: <TABLE> <CAPTION> 1996 1995 --------- -------- <S> <C> <C> Net sales 1,481 11,947 Cost of products sold 2,260 2,311 --------- -------- 3,741 14,258 Operating expenses 5,067 4,880 Interest and other income (22,311) (31,650) Income taxes 1,134 1,224 --------- -------- Aggregate loss on remeasurement (12,369) (11,288) ========= ======== </TABLE> 13 Pension Plan The Company and its Brazilian subsidiaries maintain both contributory and concontributory defined benefit pension plans covering substantially all employees in Brazil. The plans provide pension benefits that are based on years of service and employees' compensation during a specified period before retirement. The Company's present funding policy for these plans is to generally make the minimum annual contribution required by applicable regulations. Assets held by the plans are managed by an outside public pension fund institution, which also manages funds of other unrelated employers and guarantees a minimum annual fixed return of 4% on plan assets. Annual pension expense comprises the following components: <TABLE> <CAPTION> 1996 1995 -------- ------- <S> <C> <C> Service cost - benefits earned during the year 12,188 8,605 Interest cost on projected benefit obligation 7,359 5,545 Actual return on plan assets (5,318) (5,714) Net amortization 7,354 7,898 --------- ------- 21,583 16,334 --------- ------- </TABLE> Assumptions used in accounting for defined benefit pension plans are as follows: <TABLE> <CAPTION> % per annum above the general price index ------------- <S> <C> Discount rate 6.00 Rate of compensation level increase 3.75 Expected long-term rate of return on plan assets 6.00 </TABLE> F-27
Multibras S.A. Eletrodomesticos and its subsidiaries Notes to the Consolidated Financial Statements at December 31, 1996 and 1995 In thousands of U.S. dollars, unless otherwise stated --------------------------------------------------------------------------- The funded status of the pension plans is as follows: <TABLE> <CAPTION> 1996 1995 --------- -------- <S> <C> <C> Projected benefit obligation (140,393) (106,102) Plan assets at fair value 52,122 46,019 ---------- -------- Projected benefit obligation in excess of plan assets (88,271) (60,083) Unrecognized net loss (gain) 15,348 (3,524) Unrecognized net obligation, net of amortization 49,488 53,911 --------- -------- Accrued pension expense, included in other accrued expenses (23,435) (9,696) ========= ======== </TABLE> The accumulated benefit obligation, which is included in the projected benefit obligation, represents the actuarial present value of benefits attributed to employee service and compensation levels to date. At December 31, 1996 and 1995, the accumulated benefit obligation was US$ 78,333 and US$ 63,364, respectively. The vested portion was US$ 60,991 in 1996 and US$ 51,817 in 1995. 14 Fair value of financial instruments Besides cash and equivalents which are stated at cost plus accrued interest and which approximate fair value, the carrying value of the Company's other financial instruments approximates fair value at December 31, 1996 and 1995 reflecting the short-term maturity of these instruments at those dates. Based on interest rates currently available to Multibras S. A. Eletrodomesticos for bank loans with similar terms and average maturities, the fair value of long-term debt at December 31, 1996 and 1995 approximates its carrying value. Fair value estimates are made at a specific date, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. * * * F-28
ANNUAL REPORT ON FORM 10-K ITEMS 14(A)(3) AND 14(C) INDEX TO EXHIBITS YEAR ENDED DECEMBER 31, 1996 The following exhibits are submitted herewith or incorporated herein by reference in response to Items 14(a)(3) and 14(c): <TABLE> <CAPTION> NUMBER AND SEQUENTIAL DESCRIPTION PAGE OF EXHIBIT NUMBERS* ----------- ---------- <C> <C> <S> <C> 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] 3(ii) Amended and Restated By-laws of the Company (as amended January 23, 1995). [Incorporated by reference from Exhibit 3(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994] 4 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. 10(iii) (a) Whirlpool Retirement Benefits Restoration Plan (as amended January 1, 1992) [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] 10(iii) (b) 1979 Stock Option Plan (as amended April 28, 1987) [Incorporated by reference from Exhibit 10(iii)(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993] 10(iii) (c) Whirlpool Supplemental Executive Retirement Plan (as amended and restated effective December 31, 1993) [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] 10(iii) (d) 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. [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] 10(iii) (e) 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. [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] 10(iii) (f) Whirlpool Corporation Deferred Compensation Plan for Directors (as amended effective January 1, 1992 and April 20, 1993) [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] 10(iii) (g) Form of Agreement providing for severance benefits for certain executive officers [Incorporated by reference from Exhibit 10(iii)(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993] 10(iii) (h) Whirlpool Corporation 1989 Omnibus Stock and Incentive Plan (as amended June 20, 1995) [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] </TABLE> E-1
<TABLE> <CAPTION> NUMBER AND SEQUENTIAL DESCRIPTION PAGE OF EXHIBIT NUMBERS* ----------- ---------- <C> <C> <S> <C> 10(iii) (i) Whirlpool Corporation Restricted Stock Value Program (Pursuant to the 1989 Whirlpool Corporation Omnibus Stock and Incentive Plan) [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] 10(iii) (j) Whirlpool Executive Stock Appreciation and Performance Program (Pursuant to the 1989 Whirlpool Corporation Omnibus Stock and Incentive Plan) [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] 10(iii) (k) Whirlpool Corporation Nonemployee Director Stock Ownership Plan (as amended February 20, 1996, effective April 16, 1996) [Incorporated by reference from Exhibit B to the Company's proxy statement for the 1996 annual meeting of stockholders] 10(iii) (l) Whirlpool 401(k) Plan (as amended and restated April 1, 1993) [Incorporated by reference from Exhibit 10(iii)(l) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993] 10(iii) (m) Whirlpool Performance Excellence Plan (as amended January 1, 1992 and February 15, 1994) [Incorporated by reference from Exhibit 10(iii)(m) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993] 10(iii) (n) Whirlpool Corporation Executive Deferred Savings Plan (as amended effective January 1, 1992) [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] 10(iii) (o) Whirlpool Corporation Executive Officer Bonus Plan (Effective as of January 1, 1994) [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] 10(iii) (p) Whirlpool Corporation Charitable Award Contribution and Additional Life Insurance Plan for Directors (Effective April 20, 1993) [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] 10(iii) (q) Whirlpool Corporation Career Stock Grant Program (Pursuant to the 1989 Whirlpool Corporation Omnibus Stock and Incentive Plan) [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] 10(iii) (r) Whirlpool Corporation 1996 Omnibus Stock and Incentive Plan (Effective April 25, 1996) [Incorporated by reference from Exhibit A to the Company's proxy statement for the 1996 annual meeting of stockholders] 11 Statement Re: Computation of Earnings per share 12 Statement Re: Computation of the Ratios of Earnings to Fixed Charges 13 Management's Discussion and Analysis and Consolidated Financial Statements contained in Annual Report to Stockholders for the year ended December 31, 1996 21 List of Subsidiaries 23(ii) (a) Consent of Ernst & Young 23(ii) (b) Consent of Price Waterhouse 24 Powers of Attorney 27 Financial Data Schedule 99 Audited Consolidated Financial Statements of Multibras S.A. Electrodomesticos and subsidiaries </TABLE> - - -------- *This information appears only in the manually signed originals of the Form 10-K and conformed copies with exhibits. E-2