Cites Strong Sales in North America & Europe
BENTON HARBOR, Mich.–(BUSINESS WIRE)–Oct. 22, 2003–Whirlpool Corporation (NYSE:WHR) today announced third-quarter 2003 net earnings of $105 million, or $1.48 per diluted share, compared to $101 million, or $1.46 per diluted share, in the same period last year.
Third-quarter net sales of $3.1 billion increased 12.8 percent from last year, reflecting strong revenue growth in North America and Europe. (Excluding currency translations, sales increased 9 percent.) Operating profit of $204 million compared to $199 million in the prior year period, which included $16 million of pre-tax expense for restructuring and related activities.
Year-to-date sales of $8.8 billion increased 9.3 percent from the prior year period. (Excluding currency translations, year-to-date sales increased 7 percent.) Operating profit of $588 million compared to $571 million in the prior year period, which included $54 million of pre-tax expense for restructuring and related activities. Through September, year-over-year, increases in U.S. pension costs and the effects of lower Brazilian tax credits totaled approximately $90 million, which were largely offset by productivity improvements, cost reductions and savings from previous restructuring activities. The effects of these significant year-over-year changes will be mostly behind the company by the end of the fourth quarter.
“Given the cost and marketplace challenges we faced globally, we are pleased with our performance and with the contributions from our global businesses and brands,” Whitwam said. “Innovative new products and services introduced to consumers through our global distribution network continue to drive stronger sales for the company and longer-term customer loyalty.”
Third-Quarter Global Highlights
— Whirlpool Corporation formed a global strategic alliance with Fisher & Paykel Appliances, the New Zealand-based appliance manufacturer widely known for its innovative technology. The alliance involves a wide range of cooperative initiatives, including global sourcing of major home appliances and sharing and co-development of product technology.
— Whirlpool introduced a new washer that brings the benefits of automatic clothes washing to millions of consumers in emerging markets. The affordable washer was developed within Whirlpool’s global technology and manufacturing organizations as part of the company’s “Innovation for Everyone” initiative. The washer is in production at Whirlpool facilities in Brazil and China, and will be distributed to first-time laundry appliance buyers worldwide through the company’s global distribution network.
— Whirlpool Corporation was ranked 11th among the “Top 20 Companies for Leaders” recognized by Chief Executive Magazine in a survey of 300 U.S. companies. The magazine cited Whirlpool for effective leadership programs, high-potential leadership and senior-level support for developing and producing quality leaders.
— More than 600 Whirlpool employees participated in a five-day, blitz build of a Habitat home on the company’s Benton Harbor headquarters campus. The home was later transported to a permanent site nearby. Whirlpool Corporation is the largest corporate sponsor of Habitat for Humanity International, a non-profit organization that builds affordable houses in partnership with those in need of adequate shelter.
Third-Quarter Region Review
Whirlpool North America’s sales of $2.03 billion increased 12.1 percent from the prior year period. Significant growth in unit shipments and revenue during the quarter reflected the continuing consumer demand for Whirlpool(R) and KitchenAid(R) branded products. Operating profit declined 1.8 percent, due primarily to a $22 million increase in U.S. pension costs from the prior year period. Improvements in productivity and cost reductions helped offset the year-over-year increase.
U.S. industry unit shipments of major appliances (T7(a)) increased 9.3 percent from the prior year period. Fourth-quarter shipments are expected to increase by approximately 3 percent. Given the industry performance in the third quarter, the company now expects full-year shipments to increase by approximately 3 percent.
Strong consumer demand for Whirlpool brand products, including the Whirlpool(R) Duet(R) washer and dryer pair, continued during the quarter. KitchenAid brand introduced a full line of KitchenAid(R) Pro Line(TM) major kitchen appliances, including built-in refrigerators and ovens, cooktops, warming drawers and dishwashers with a professional look and performance. Whirlpool Canada received the 2003 Energy Star Manufacturer of the Year Award from Natural Resources Canada for setting new energy efficiency performance standards for appliances.
Whirlpool Europe’s sales of $704 million increased 18.7 percent from the prior year period. (Excluding currency translations, sales increased approximately 5 percent.) Operating profit improved 40 percent from the prior year on higher sales and unit volumes, as well as record levels of productivity and savings from previous restructuring activities.
Continuing strong consumer demand for the innovative Whirlpool(R) Dreamspace(TM) clothes washer, the Whirlpool(R) Conquest(TM) side-by-side refrigerator and the Whirlpool(R) Mini-BI microwave oven helped drive positive operating performance.
During the quarter, appliance industry unit shipments increased slightly from the prior year period. Based on current economic conditions, the company now expects full-year industry shipments to grow approximately 2-to-3 percent from last year’s level.
Whirlpool Asia’s sales of $91 million increased 4.6 percent from the prior year period. (Excluding currency translations, sales were flat.) Operating profit was affected by challenging market conditions in Hong Kong, Taiwan and Korea. Results from India and China–Whirlpool’s two largest businesses in the region–were flat.
Based on current economic conditions, the company expects full-year appliance industry shipments in the region to increase approximately 5 percent from last year’s level.
During the quarter, Whirlpool brand in China continued to expand distribution of the Whirlpool(R) Jupiter(TM) clothes washer with Season Sensor, an innovative technology that automatically adjusts the wash cycle for seasonal changes in water temperature.
Whirlpool Latin America’s sales of $322 million increased 7.4 percent from the prior year period. (Excluding currency translations, sales were up approximately 1 percent.) Difficult macroeconomic conditions in the quarter dramatically reduced consumer spending and demand, resulting in a significant industry shipment decline of 10 percent. Within this environment, operating profit for the region declined 46 percent.
Based on current economic conditions, the company now expects full-year industry unit shipments to decline 12-to-14 percent from last year’s level.
The company noted that there are several positive economic trends in Brazil, including: continued lowering of interest rates, declining inflation rates, and the passage in the Brazilian Congress of several economic reform programs to deal with budget challenges. In addition, lower interest-rate financing initiatives from the Brazilian government, banks and retailers led to improved appliance order levels late in the third quarter. Order levels are expected to continue to improve for the remainder of the year and into 2004.
During the quarter, the company’s Brastemp and Consul brands placed fourth and ninth, respectively, in a consumer survey of the most recognized brands in Brazil among all product and service categories. The national “Top of Mind” brand survey was conducted by Datafolha, an independent research institute. The company also was voted one of the “100 Best Companies to Work For” in Brazil by Exame magazine. The company is among only five companies that have received the award in each of the last seven years.
Pension Contribution
During the quarter, the company made a voluntary $162 million pre-tax cash contribution to its U.S. pension funds. This action reduces and levels out future funding requirements, and also reduces the pension expense increase projected for 2004.
Outlook
“We expect that our focus on global innovation and distribution will help drive continued improvement in the company’s performance throughout the remainder of the year,” Whitwam said. “In addition, our ongoing emphasis on productivity and cost reduction is expected to help offset the remaining pension and tax headwinds from 2002.”
He added: “However, the steep economic challenges in Brazil have been worse than we anticipated. Despite current signs of improvement, we now believe that the full-year contributions from our Latin America business will fall short of our expectations. As a result, we currently project that full year earnings performance will be closer to the lower end of our previous 2003 guidance of $5.90 to $6.10 per share.”
Additional operating segment information is available in the “Investors” section of www.whirlpoolcorp.com. At 9:30 a.m. (EDT) Wednesday, October 22, 2003, the company will be hosting a conference call, which can be heard by visiting www.whirlpoolcorp.com and clicking on the “Investors” button and then the “Conference Call Audio” menu item.
(a) T7 refers to the following household appliance categories: washers, dryers, refrigerators, freezers, dishwashers, ranges and compactors.
Whirlpool Corporation is the world’s leading manufacturer and marketer of major home appliances, with annual sales of over $11 billion, 68,000 employees, and nearly 50 manufacturing and technology research centers around the globe. The company markets Whirlpool, KitchenAid, Brastemp, Bauknecht, Consul and other major brand names to consumers in more than 170 countries. Additional information about the company can be found on the Internet at www.whirlpoolcorp.com.