10-K


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-3932

WHIRLPOOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
38-1490038
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
2000 North M-63, Benton Harbor, Michigan
 
49022-2692
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (269) 923-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common stock, par value $1 per share
 
Chicago Stock Exchange and New York Stock Exchange
0.625% Senior Notes due 2020
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 
Yesý No¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes¨ Noý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
Yesý No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yesý No¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. 
ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one)
          Large accelerated filer  ý
Accelerated filer ¨
          Non-accelerated filer ¨ (Do not check if a smaller reporting  company)
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes¨ Noý
The aggregate market value of voting common stock of the registrant held by stockholders not including voting stock held by directors and executive officers of the registrant and certain employee plans of the registrant (the exclusion of such shares shall not be deemed an admission by the registrant that any such person is an affiliate of the registrant) at the close of business on June 30, 2015 (the last business day of the registrant’s most recently completed second fiscal quarter) was $13,245,777,309.
On February 12, 2016, the registrant had 77,233,402 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:
Document
  
Part of Form 10-K into which incorporated
The registrant’s proxy statement for the 2016 annual meeting of stockholders (the “Proxy Statement”)
  
Part III



WHIRLPOOL CORPORATION
ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 2015
TABLE OF CONTENTS
 
 
PAGE
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

 
 
 
 
Item 15.
 
 
 
 
 
 
 



PART I
ITEM 1.
BUSINESS
Whirlpool Corporation, the world’s leading global 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. Whirlpool manufactures products in 14 countries and markets products in nearly every country around the world under brand names such as Whirlpool, KitchenAid, Maytag, Consul, Brastemp, Amana, Bauknecht, Jenn-Air and Indesit. Whirlpool’s reportable segments consist of North America, EMEA (Europe, Middle East and Africa), Latin America and Asia. As of December 31, 2015, Whirlpool had approximately 97,000 employees.
As used herein, and except where the context otherwise requires, “Whirlpool,” “the Company,” “we,” “us,” and “our” refer to Whirlpool Corporation and its consolidated subsidiaries.
Products and Regions
Whirlpool manufactures and markets a full line of major home appliances and related products. Our principal products are laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other small domestic appliances. We also produce hermetic compressors for refrigeration systems.
The following table provides the percentage of net sales for each class of products which accounted for 10% or more of our consolidated net sales over the last three years:
 
 
2015
 
2014
 
2013
Laundry Appliances
 
29
%
 
27
%
 
29
%
Refrigerators and Freezers
 
28
%
 
28
%
 
29
%
Cooking Appliances
 
18
%
 
18
%
 
18
%
Other
 
25
%
 
27
%
 
24
%
Net Sales
 
100
%
 
100
%
 
100
%
In North America, Whirlpool markets and distributes major home appliances and small domestic appliances under a variety of brand names. In the United States, we market and distribute products primarily under the Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Roper, Admiral, Affresh and Gladiator brand names primarily to retailers, distributors and builders. In Canada, we market and distribute major home appliances primarily under the Inglis, Admiral, Whirlpool, Maytag, Jenn-Air, Amana, Roper, Estate and KitchenAid brand names. In Mexico, we market and distribute major home appliances primarily under the Whirlpool, Maytag, Acros, KitchenAid and Supermatic brand names. We sell some products to other manufacturers, distributors, and retailers for resale in North America under those manufacturers’ and retailers’ respective brand names.
In EMEA, we market and distribute our major home appliances primarily under the KitchenAidWhirlpoolIndesit and Hotpoint brand names (Whirlpool ownership of the Hotpoint brand in the EMEA and Asia Pacific regions is not affiliated with the Hotpoint brand sold in the Americas), and major and small domestic appliances under the KitchenAid and Hotpoint brand names. In addition to our operations in Western and Eastern Europe, Turkey and Russia, we have sales subsidiaries in Morocco and Dubai. We market and distribute a full line of products under the Whirlpool and KIC brand names in South Africa. Our European operations also market and distribute products under the WhirlpoolAristonBauknecht, Maytag, Amana and Ignis brand names to distributors and dealers in Africa and the Middle East.
In Latin America, we market and distribute our major home appliances and small domestic appliances primarily under the Consul, Brastemp, Whirlpool and KitchenAid brand names. We manage sales and distribution through our local entities in Brazil, Argentina, Chile, Peru, Ecuador, Colombia and Guatemala. We also serve the countries of Bolivia, Paraguay, Uruguay, Venezuela, the Caribbean and Central America countries, where we manage appliances sales and distribution through our accredited distributors. Our Latin America operations also produce hermetic compressors for refrigeration systems.






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In Asia, we have organized the marketing and distribution of our major home appliances and small domestic appliances into five operating groups: (1) mainland China; (2) Hong Kong and Taiwan; (3) India, which includes Bangladesh, Sri Lanka, Nepal and Pakistan; (4) Oceania, which includes Australia, New Zealand and Pacific Islands; and (5) Southeast Asia, which includes Thailand, Singapore, Malaysia, Indonesia, Vietnam, the Philippines, Korea, Myanmar and Japan. We market and distribute our products in Asia primarily under the Whirlpool, Maytag, KitchenAid, Amana, Bauknecht, Jenn-Air, Diqua, and Royalstar brand names through a combination of direct sales to appliance retailers and chain stores and through full-service distributors to a large network of retail stores.
Competition
Competition in the major home appliance industry is intense, including competitors such as Arcelik, Bosch Siemens, Electrolux, General Electric, Haier, Kenmore, LG, Mabe, Midea, Panasonic and Samsung, many of which are increasingly expanding beyond their existing manufacturing footprint. Moreover, our customer base includes large, sophisticated trade customers who have many choices and demand competitive products, services and prices. Competition in our business is based upon a wide variety of factors, including selling price, product features and design, performance, innovation, energy efficiency, quality, cost, distribution and financial incentives. These financial incentives include cooperative advertising, co-marketing funds, salesperson incentives, volume rebates and terms. We believe that we can best compete in the current environment by focusing on introducing new and innovative products, building strong brands, enhancing trade customer and consumer value with our product offerings, continuing to expand our regional footprint, expanding trade distribution channels, increasing productivity, improving quality, lowering costs, and taking other efficiency-enhancing measures.
Raw Materials and Purchased Components
We are generally not dependent upon any one source for raw materials or purchased components essential to our business. In areas where a single supplier is used, alternative sources are generally available and can be developed within the normal manufacturing environment. Some supply disruptions and unanticipated costs may be incurred in transitioning to a new supplier if a prior single supplier relationship were abruptly interrupted or terminated. Supply constraints due to environmental impacts such as hurricanes and floods have required the qualification and use of alternate materials, some of which were at premium costs. We believe such raw materials and components will be available in adequate quantities to meet forecasted production schedules.
Trademarks, Licenses and Patents
We consider the trademarks, licenses and patents we own, in the aggregate, to be a valuable asset. Whirlpool is the owner of a number of trademarks in the United States and foreign countries. The most important trademarks to North America are Whirlpool, Maytag, Jenn-Air, KitchenAid, Amana and Acros. The most important trademarks to Latin America are Consul, Brastemp, Whirlpool and KitchenAid. The most important trademarks to EMEA are Whirlpool, KitchenAid, Bauknecht, Indesit, Hotpoint (Whirlpool ownership of the Hotpoint brand in the EMEA and Asia Pacific regions is not affiliated with the Hotpoint brand sold in the Americas), Hotpoint-Ariston and Ignis. The most important trademarks to Asia are Whirlpool, Royalstar and Diqua. We receive royalties from licensing our trademarks to third parties to manufacture, sell and service certain products bearing the Whirlpool, Maytag, KitchenAid, and Amana brand names. We continually apply for and obtain United States and foreign patents. The primary purpose in obtaining patents is to protect our designs and technologies.
Research and Development
Expenditures for research and development relating to new and innovative products and the improvement of existing products were approximately $579 million, $563 million and $582 million in 2015, 2014 and 2013, respectively.
Protection of the Environment
Our 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. Our policy is to comply with all such laws and regulations. Where laws and regulations are less restrictive, we have established and are following our own standards, consistent with our commitment to environmental responsibility.
We believe that we are in compliance, in all material respects, with presently applicable governmental provisions relating to environmental protection in the countries in which we have manufacturing operations. Compliance with these environmental laws and regulations has not had a material effect on capital expenditures, earnings, or our competitive position during 2015 and is not expected to be material in 2016.


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The entire major home appliance industry, including Whirlpool, must contend with the adoption of stricter governmental energy and environmental standards. These standards were phased-in over the past several years and include the general phase-out of ozone-depleting chemicals used in refrigeration, energy standards rulemakings for selected major appliances, regulatory restrictions on the materials content specified for use in our products by some jurisdictions and mandated recycling of our products at the end of their useful lives. Compliance with these various standards, as they become effective, will require some product redesign. However, we believe, based on our understanding of the current state of proposed regulations, that we will be able to develop, manufacture, and market products that comply with these regulations.
Whirlpool participates in environmental assessments and cleanup at a number of locations globally. These include operating and non-operating facilities, previously owned properties and waste sites, including "Superfund" (Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)) sites. However, based upon our evaluation of the facts and circumstances relating to these sites along with the evaluation of our technical consultants, we do not presently anticipate any material adverse effect upon our earnings, financial condition, or competitive position arising out of the resolution of these matters or the resolution of any other known governmental proceeding regarding environmental protection matters.
Other Information
For information about the challenges and risks associated with our foreign operations, see “Risks Relating to Our Business” under Item 1A.
For certain other financial information concerning our business segments and foreign and domestic operations, see Note 14 to the Consolidated Financial Statements.
For information on our global restructuring plans, and the impact of these plans on our operating segments, see Note 11 to the Consolidated Financial Statements.
Whirlpool China Acquisition
On October 24, 2014, Whirlpool's wholly-owned subsidiary, Whirlpool (China) Investment Co., Ltd., completed its acquisition of a 51% equity stake in Hefei Rongshida Sanyo Electric Co., Ltd. ("Hefei Sanyo"), a joint stock company whose shares are listed and traded on the Shanghai Stock Exchange, which we have since renamed to Whirlpool (China) Co., Ltd. ("Whirlpool China").
The aggregate purchase price was RMB 3.4 billion (approximately $551 million at the dates of purchase of each step of the transaction). The Company funded the total consideration for the shares with cash on hand. The cash paid for the private placement step is considered restricted cash, which is used to fund capital and technical resources to enhance Whirlpool China’s research and development and working capital.
With this acquisition, Whirlpool also gains manufacturing scale and a competitive cost structure. Further discussion of this transaction can be found in Note 2 of the Notes to the Consolidated Financial Statements.
Indesit Company S.p.A. Acquisition
On December 3, 2014, Whirlpool completed the final step in its acquisition of Indesit Company S.p.A. ("Indesit") and on the same day Indesit delisted from the Electronic Stock Market organized and managed by Borsa Italiana S.p.A. Total consideration paid for Indesit was €1.1 billion (approximately $1.4 billion at the dates of purchase of each step in the transaction) in aggregate net of cash acquired.
The Company funded the aggregate purchase price for Indesit through borrowings under its credit facility and commercial paper programs, and repaid a portion of such borrowings through the issuance of an aggregate principal amount of $650 million in senior notes on November 4, 2014 and an aggregate principal amount of €500 million (approximately $525 million as of the date of issuance) in senior notes on March 12, 2015. Additional information about our 2015 financing arrangements can be found in Note 6.
This transaction builds Whirlpool’s market position within Europe, and we believe will enable sustainable growth given the complementary market positions, product offerings and distribution channels of Whirlpool and Indesit throughout Europe. Further discussion of this transaction can be found in Note 2 of the Notes to the Consolidated Financial Statements.


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Executive Officers of the Registrant
The following table sets forth the names and ages of our executive officers on February 16, 2016, the positions and offices they held on that date, and the year they first became executive officers:
Name
 
Office
 
First Became
an Executive
Officer
 
Age
Jeff M. Fettig
 
Director, Chairman of the Board and Chief Executive Officer
 
1994
 
58
Marc R. Bitzer
 
Director, President and Chief Operating Officer
 
2006
 
51
Esther Berrozpe Galindo
 
Executive Vice President and President, Whirlpool EMEA
 
2013
 
46
João C. Brega
 
Executive Vice President and President, Whirlpool Latin America
 
2012
 
52
Joseph T. Liotine
 
Executive Vice President and President, Whirlpool North America
 
2014
 
43
David T. Szczupak
 
Executive Vice President, Global Product Organization
 
2008
 
60
Larry M. Venturelli
 
Executive Vice President and Chief Financial Officer
 
2012
 
55
The executive officers named above were elected by our Board of Directors to serve in the office indicated until the first meeting of the Board of Directors following the annual meeting of stockholders in 2016 and until a successor is chosen and qualified or until the executive officer's earlier resignation or removal. Each of our executive officers has held the position set forth in the table above or has served Whirlpool in various executive or administrative capacities for at least the past five years.
Available Information
Financial results and investor information (including Whirlpool’s Form 10-K, 10-Q, and 8-K reports) are accessible at Whirlpool’s website: investors.whirlpoolcorp.com. Copies of our Form 10-K, 10-Q, and 8-K reports and amendments, if any, are available free of charge through our website on the same day they are filed with, or furnished to, the Securities and Exchange Commission.


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ITEM 1A.
RISK FACTORS
This report contains statements referring to Whirlpool that are not historical facts and are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which are intended to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, are based on current projections about operations, industry conditions, financial condition and liquidity. Words that identify forward-looking statements include words such as “may,” “could,” “will,” “should,” “possible,” “plan,” “predict,” “forecast,” “potential,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “may impact,” “on track,” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, a merger, or our businesses. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Those statements are not guarantees and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results could differ materially and adversely from these forward-looking statements. These risks and uncertainties include, but are not limited to, the following:
Risks Relating to Our Business
We face intense competition in the major home appliance industry and failure to successfully compete may negatively affect our business and financial performance. Each of our operating segments operates in a highly competitive business environment and faces intense competition from a growing number of competitors, many of which have strong consumer brand equity. Several of these competitors, such as Bosch Siemens, Electrolux, General Electric, Haier, LG, Panasonic and Samsung are large, well-established companies, many ranking among the Global Fortune 150, and have demonstrated a commitment to success in the global market. Moreover, our customer base includes large, sophisticated trade customers who have many choices and demand competitive products, services and prices. Competition in the global appliance market is based on a number of factors including selling price, product features and design, performance, innovation, reputation, energy efficiency, quality, cost, distribution, and financial incentives, such as cooperative advertising, co-marketing funds, sales person incentives, volume rebates and terms. Many of our competitors are increasingly expanding beyond their existing manufacturing footprints. Our competitors, especially global competitors with low-cost sources of supply and/or highly protected home markets outside the United States, have aggressively priced their products and/or introduced new products to increase market share and expand into new geographies. If we are unable to successfully compete in this highly competitive environment, our business and financial performance could be negatively affected.
We face risks associated with our acquisitions and other investments and risks associated with our increased presence in emerging markets. From time to time, we make strategic acquisitions and participate in joint ventures. For example, we acquired Indesit and a majority interest in Hefei Sanyo in the fourth quarter of 2014. These transactions, and other transactions that we have entered into or which we may enter into in the future, can involve significant challenges and risks, including that the transaction does not advance our business strategy or fails to produce a satisfactory return on our investment. We may encounter difficulties in integrating acquisitions with our operations, applying our internal control processes to these acquisitions, and in managing strategic investments. Integrating acquisitions is often costly and may require significant attention from management. Furthermore, we may not realize the degree, or timing, of benefits we anticipate when we first enter into a transaction. While our evaluation of any potential acquisition includes business, legal and financial due diligence with the goal of identifying and evaluating the material risks involved, our due diligence reviews may not identify all of the issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities or costs associated with any quality issues with an acquisition target's legacy products.
Our growth plans include efforts to increase revenue from emerging markets, including through acquisitions. Local business practices in these countries may not comply with U.S. laws, local laws or other laws applicable to us. If our compliance policies, including the requirement to comply with all laws, are not followed, such non-compliant practices may result in increased liability risks. For example, we may incur unanticipated costs, expenses or other liabilities as a result of an acquisition target’s violation of applicable laws, such as the U.S. Foreign Corrupt Practices Act (FCPA) or similar worldwide anti-bribery laws in non-U.S. jurisdictions. We may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, litigation, and other liabilities. In addition, our recent and future acquisitions may increase our exposure to other risks associated with operating internationally, including foreign currency exchange rate fluctuations; political, legal and economic instability; inflation; changes in tax rates and tax laws; and work stoppages and labor relations. See Note 2 to the Consolidated Financial Statements for additional information regarding the Hefei Sanyo and Indesit acquisitions.


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The loss of, or substantial decline in, sales to any of our key trade customers, which include Lowe's, Sears, Home Depot, hhgregg, Best Buy, GPA - Grupo Pão De Açúcar, IKEA, Alno, Suning, major buying groups, and builders could adversely affect our financial performance. We sell to a sophisticated customer base of large trade customers that have significant leverage as buyers over their suppliers. Most of our products are not sold through long-term contracts, which facilitates the trade customers' ability to change volume among suppliers. As the trade customers continue to become larger, they may seek to use their position to improve their profitability by various means, including improved efficiency, lower pricing, and increased promotional programs. If we are unable to meet their demand requirements, our volume growth and financial results could be negatively affected. The loss of, or substantial decline in volume of, sales to Lowe's, Sears, Home Depot, hhgregg, Best Buy, GPA - Grupo Pão De Açúcar, IKEA, Alno, Suning, major buying groups, builders, or any other trade customers to which we sell a significant amount of products, could adversely affect our financial performance. Additionally, the loss of market share or financial difficulties, including bankruptcy and financial restructuring, by these trade customers could have a material adverse effect on our liquidity, financial position and results of operations.
Risks associated with our international operations may decrease our revenues and increase our costs. For the year ended December 31, 2015, we derived approximately 50% of our net sales from outside of North America, including 16% in Latin America, 27% in EMEA and 7% in Asia. We expect that international sales will continue to account for a significant percentage of our net sales in the foreseeable future. Accordingly, we face numerous risks associated with conducting international operations, any of which could negatively affect our financial performance. These risks include the following:
political, legal, and economic instability and uncertainty;
foreign currency exchange rate fluctuations;
changes in foreign tax rules, regulations and other requirements, such as changes in tax rates and statutory and judicial interpretations of tax laws;
changes in diplomatic and trade relationships, including sanctions resulting from the current political situation in Russia and Ukraine;
inflation;
changes in foreign country regulatory requirements;
various import/export restrictions and the availability of required import/export licenses;
imposition of foreign tariffs and other trade barriers;
managing widespread operations and enforcing internal policies and procedures such as compliance with U.S. and foreign anti-bribery and anti-corruption regulations, such as the FCPA, and antitrust laws;
work stoppages and labor relations;
disruptions in the shipping of imported and exported products;
government price controls;
extended payment terms and the inability to collect accounts receivable; and
limitations on the repatriation or movement of earnings and cash.
As a U.S. corporation, we are subject to the FCPA, which may place us at a competitive disadvantage to foreign companies that are not subject to similar regulations. Additionally, any determination that we have violated the FCPA or other anti-corruption laws could have a material adverse effect on us.
Terrorist attacks, armed conflicts, labor disputes, natural disasters, governmental actions and epidemics could affect our domestic and international sales, disrupt our supply chain, and impair our ability to produce and deliver our products. Such events could directly impact our physical facilities or those of our suppliers or customers, both in the United States and elsewhere.
Fluctuations and volatility in the cost of raw materials and purchased components could adversely affect our operating results. The primary materials used to produce and manufacture our products are steel, plastic resins, and base metals, such as aluminum, copper, zinc, and nickel. On a global and regional basis, the sources and prices of those materials and components containing those materials are susceptible to significant price fluctuations due to supply/demand trends, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, the economic climate, and other unforeseen circumstances. Significant increases in these and other costs in the future could have a material adverse effect on our operating results.


8


Foreign currency fluctuations may affect our financial performance. We generate a significant portion of our revenue and incur a significant portion of our expenses in currencies other than the U.S. dollar. Changes in the exchange rates of functional currencies of those operations affect the U.S. dollar value of our revenue and earnings from our foreign operations. We use currency forwards and options to manage our foreign currency transaction exposures. We cannot completely eliminate our exposure to foreign currency fluctuations, which may adversely affect our financial performance. In addition, because our consolidated financial results are reported in U.S. dollars, if we generate sales or earnings in other currencies, the translation of those results into U.S. dollars can result in a significant increase or decrease in the amount of those sales or earnings. Finally, the amount of legal contingencies related to foreign operations may fluctuate significantly based upon changes in the exchange rates and usually cannot be managed with currency forwards, options or other arrangements. Such fluctuations in exchange rates can significantly increase or decrease the amount of any legal contingency related to our foreign operations and make it difficult to assess and manage the potential exposure.
Unfavorable results of legal and tax proceedings could materially adversely affect our business and financial condition and performance. We are subject to a variety of litigation and legal compliance risks relating to, among other things, products, intellectual property rights, income and non-income taxes, environmental matters, corporate matters, commercial matters, competition laws and distribution, marketing and trade practices. For example, we are currently disputing certain income and non-income tax related assessments issued by the Brazilian authorities relating to BEFIEX, CFC Tax and to IPI tax credits (see Note 7 and Note 12 of the Notes to the Consolidated Financial Statements for additional information on these matters). Unfavorable outcomes regarding these assessments could have a material adverse effect on our financial position, liquidity, or results of operations in any particular reporting period. Results of legal proceedings cannot be predicted with certainty and for some matters, such as class actions, no insurance is likely available. Regardless of merit, legal proceedings may be both time-consuming and disruptive to our operations and could divert the attention of our management and key personnel from our business operations. We estimate loss contingencies and establish accruals as required by generally accepted accounting principles, based on our assessment of contingencies where liability is deemed probable and reasonably estimable, in light of the facts and circumstances known to us at a particular point in time. Subsequent developments in legal proceedings, volatility in foreign currency exchange rates and other factors may affect our assessment and estimates of the loss contingency recorded and could result in an adverse effect on our results of operations in the period in which a liability would be recognized or cash flows for the period in which amounts would be paid. Actual results may significantly vary from our reserves.
We are subject to, and could be further subject to, governmental investigations or actions by other third parties. We are subject to various federal, foreign and state laws, including antitrust laws, violations of which can involve civil or criminal sanctions. Responding to governmental investigations or other actions may be both time-consuming and disruptive to our operations and could divert the attention of our management and key personnel from our business operations. The impact of these and other investigations and lawsuits could have a material adverse effect on our financial position, liquidity and results of operations.
Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation. The conduct of our businesses, and the production, distribution, sale, advertising, safety, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to foreign laws and regulations administered by government entities and agencies in markets in which we operate. These laws and regulations may change, sometimes dramatically, as a result of political, economic or social events. Changes in laws, regulations or governmental policy and the related interpretations may alter the environment in which we do business and, therefore, may impact our results or increase our costs or liabilities. In addition, we incur and will continue to incur capital and other expenditures to comply with various laws and regulations, especially relating to protection of the environment, human health and safety and energy efficiency. These types of costs could adversely affect our financial performance. Additionally, we could be subjected to future liabilities, fines or penalties or the suspension of product production for failing to comply with various laws and regulations, including environmental regulations. Cleanup obligations that might arise at any of our manufacturing sites or the imposition of more stringent environmental laws in the future could adversely affect us.
Failure to maintain our reputation and brand image could negatively impact our business. Our brands have worldwide recognition, and our success depends on our ability to maintain and enhance our brand image and reputation. Maintaining, promoting and growing our brands depends on our design and marketing efforts, including advertising and consumer campaigns, as well as product innovation. We could be adversely impacted if we fail to achieve any of these objectives or if, whether or not justified, the reputation or image of any of our brands is tarnished or receives negative publicity. In addition, adverse publicity about regulatory or legal action against us, or product quality issues, could damage our reputation and brand image, undermine our customers' confidence in us and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.


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In addition, our success in maintaining, extending and expanding our brand image depends on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and online dissemination of advertising campaigns. Negative posts or comments about us on social networking and other websites that spread rapidly through such forums could seriously damage our reputation and brand image. If we do not maintain, extend and expand our brand image, then our product sales, financial condition and results of operations could be materially and adversely affected.
An inability to effectively execute and manage our business objectives could adversely affect our financial performance. The highly competitive nature of our industry requires that we effectively execute and manage our business including our global operating platform initiative. Our global operating platform initiative aims to reduce costs, expand margins, drive productivity and quality improvements, accelerate our rate of innovation, and drive shareholder value. Our inability to effectively control costs and drive productivity improvements could affect our profits. In addition, our inability to provide high-quality, innovative products could adversely affect our ability to maintain or increase our sales, which could negatively affect our revenues and overall financial performance. Additionally, our success is dependent on anticipating and appropriately reacting to changes in customer preferences and on successful new product and process development and product relaunches in response to such changes. Our future results and our ability to maintain or improve our competitive position will depend on our capacity to gauge the direction of our key markets and upon our ability to successfully and timely identify, develop, manufacture, market, and sell new or improved products in these changing markets.
We may be subject to information technology system failures, network disruptions, cybersecurity attacks and breaches in data security, which may materially adversely affect our operations, financial condition and operating results. We depend on information technology as an enabler to improve the effectiveness of our operations and to interface with our customers, as well as to maintain financial accuracy and efficiency. Information technology system failures, including suppliers' or vendors' system failures, could disrupt our operations by causing transaction errors, processing inefficiencies, delays or cancellation of customer orders, the loss of customers, impediments to the manufacture or shipment of products, other business disruptions, or the loss of or damage to intellectual property through security breach.
In addition, we have outsourced certain information technology support services and administrative functions, such as payroll processing and benefit plan administration, to third-party service providers and may outsource other functions in the future to achieve cost savings and efficiencies. If the service providers to which we outsource these functions do not perform effectively, we may not be able to achieve the expected cost savings and may have to incur additional costs to correct errors made by such service providers. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies or the loss of or damage to intellectual property through security breach, or harm employee morale.
Our information systems, or those of our third-party service providers, could also be penetrated by outside parties' intent on extracting information, corrupting information or disrupting business processes. Such unauthorized access could disrupt our business and could result in the loss of assets. Cybersecurity attacks are becoming more sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. These events could impact our customers and reputation and lead to financial losses from remediation actions, loss of business or potential liability or an increase in expense, all of which may have a material adverse effect on our business.
Product liability or product recall costs could adversely affect our business and financial performance. We are subject to the risk of exposure to product liability and product recall claims if any of our products are alleged to have resulted in injury to persons or damage to property. In the event that any of our products prove to be defective, we may need to recall and/or redesign such products. In addition, any claim or product recall that results in significant adverse publicity, particularly if those claims or recalls cause customers to question the safety or reliability of our products, may negatively affect our business, financial condition, or results of operations. We do maintain product liability insurance, but this insurance may not be adequate to cover losses related to product liability claims brought against us. We may also be involved in certain class action and other litigation, for which no insurance is available. Product liability insurance could become more expensive and difficult to maintain and may not be available on commercially reasonable terms, if at all. In addition, we do not maintain any product recall insurance. Therefore any product recall we are required to initiate could have a significant impact on our operating results and/or cash flows.
We regularly engage in investigations of potential quality and safety issues as part of our ongoing effort to deliver quality products to our customers. We are currently investigating a limited number of potential quality and safety issues, and as necessary, we undertake to effect repair or replacement of appliances. Currently we are implementing a corrective action plan affecting certain of our Indesit and Hotpoint branded dryers (see Note 7 of the Notes to the Consolidated Financial Statements for additional information on these matters). Actual costs of these issues and any future issues depend upon several factors, including the number of consumers who respond to a particular recall, repair and administrative costs, whether the cost of any corrective action is borne initially by Whirlpool or the supplier, and, if initially borne by Whirlpool, whether we will be successful in recovering our costs


10


from the supplier. The actual costs incurred as a result of these issues and any future issues could have a material adverse effect on our business, financial condition or results of operations.
We face inventory and other asset risk. We write-down product and component inventories that have become obsolete or do not meet anticipated demand or net realizable value. We also review our long-lived and intangible assets for impairment whenever events or changed circumstances indicate the carrying amount of an asset may not be recoverable. If we determine that impairment has occurred, we record a write-down to adjust carrying value to fair value. No assurance can be given that, given the unpredictable pace of product obsolescence and business conditions with trade customers and in general, we will not incur additional inventory or asset related charges. Such charges could materially adversely affect our financial condition and operating results.
We are exposed to risks associated with the uncertain global economy. Uncertain and changing economic conditions within our regions, along with national debt and fiscal concerns in various regions and government austerity measures, are posing challenges to the industry in which Whirlpool operates. A number of economic factors, including, but not limited to, gross domestic product, availability of consumer credit, interest rates, consumer sentiment and debt levels, retail trends, housing starts, sales of existing homes, the level of mortgage refinancing and defaults, fiscal and credit market uncertainty, and foreign currency exchange rates, generally affect demand for our products.
Economic uncertainty and related factors exacerbate negative trends in business and consumer spending and may cause certain customers to push out, cancel, or refrain from placing orders for our products. Uncertain market conditions, difficulties in obtaining capital, or reduced profitability may also cause some customers to scale back operations, exit markets, merge with other retailers, or file for bankruptcy protection and potentially cease operations, which can also result in lower sales and/or additional inventory. These conditions may similarly affect key suppliers, which could impair their ability to deliver parts and result in delays for our products or added costs. In addition, these conditions may lead to strategic alliances by, or consolidation of, other appliance manufacturers, which could adversely affect our ability to compete effectively.
A decline in economic activity and conditions in the United States, Latin America, Europe, China and the other areas in which we operate have had an adverse effect on our financial condition and results of operations in recent years, and future declines and adverse conditions could have a similar adverse effect. Regional, political and economic instability in Russia and Ukraine may adversely affect business conditions and may disrupt our operations and have an adverse effect on our financial condition and results of operations. Uncertainty about future economic and industry conditions also makes it more challenging for us to forecast our operating results, make business decisions, and identify and prioritize the risks that may affect our businesses, sources and uses of cash, financial condition and results of operations. We may be required to implement additional cost reduction efforts, including restructuring activities, which may adversely affect our ability to capitalize on opportunities in a market recovery. In addition, our operations are subject to general credit, liquidity, foreign exchange, market and interest rate risks. Our ability to invest in our businesses, fund strategic acquisitions and refinance maturing debt obligations depends in part on access to the capital markets.
If we do not timely and appropriately adapt to changes resulting from the uncertain macroeconomic environment and industry conditions, or to difficulties in the financial markets, or if we are unable to continue to access the capital markets, our business, financial condition and results of operations may be materially and adversely affected.
The ability of suppliers to deliver parts, components and manufacturing equipment to our manufacturing facilities, and our ability to manufacture without disruption, could affect our global business performance. We use a wide range of materials and components in the global production of our products and use numerous suppliers to provide materials and components. Because we generally do not have guaranteed supply arrangements with our suppliers and some key parts may be available only from a single supplier or a limited group of suppliers, we are subject to supply and pricing risk. In addition, certain proprietary component parts used in some of our products are provided by single-source unaffiliated third-party suppliers. We would be unable to obtain these proprietary component parts for an indeterminate period of time if these single-source suppliers were to cease or interrupt production or otherwise fail to supply these components to us, which could adversely affect our product sales and operating results. Our operations and operations at suppliers' facilities are subject to disruption for a variety of reasons, including, but not limited to, work stoppages, labor relations, intellectual property claims against suppliers, information technology failures, and hazards such as fire, earthquakes, flooding, or other natural disasters, insurance for any of which may not be available, affordable or adequate. Such disruption could interrupt our ability to manufacture certain products. Any significant disruption could negatively impact our revenue and earnings performance.


11


Our ability to attract, develop and retain executives and other qualified employees is crucial to our results of operations and future growth. We depend upon the continued services and performance of our key executives, senior management and skilled personnel, particularly our professionals with experience in our business and operations and the home appliance industry. We cannot be sure that any of these individuals will continue to be employed by us. A lengthy period of time is required to hire and develop replacement personnel when skilled personnel depart Whirlpool. An inability to hire, develop, engage and retain a sufficient number of qualified employees could materially hinder our business by, for example, delaying our ability to bring new products to market or impairing the success of our operations.
A deterioration in labor relations could adversely impact our global business. As of December 31, 2015, we had approximately 97,000 employees. We are subject to separate collective bargaining agreements with certain labor unions, which generally have two to three year terms, as well as various other commitments regarding our workforce. We are periodically in negotiations with certain of the unions representing our employees and may be subject to employee work stoppages that, if such events were to occur, may have a material adverse effect on our business, financial condition, or results of operations. Further, we cannot be assured that we will be able to renew collective bargaining agreements on the same or similar terms, or at all, which may also have a material adverse effect on our business, financial condition, or results of operations.
Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brands. We consider our intellectual property rights, including patents, trademarks, trade secrets and licensing agreements, to be a significant and valuable aspect of our business. We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third party nondisclosure and assignment agreements. Our failure to obtain or adequately protect our trademarks, products, new features of our products, or our processes may diminish our competitiveness.
We have applied for patent protection in the United States and other jurisdictions with respect to certain innovations and new products, product features, and processes. We cannot be assured that the U.S. Patent and Trademark Office or any other jurisdiction will approve any of our patent applications. Additionally, the patents we own could be challenged, invalidated, or others could design around our patents and the patents may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Further, the laws of certain foreign countries in which we do business, or contemplate doing business in the future, do not recognize intellectual property rights or protect them to the same extent as United States law. As a result, these factors could weaken our competitive advantage with respect to our products, services, and brands in foreign jurisdictions, which could adversely affect our financial performance.
Moreover, while we do not believe that any of our products infringe on enforceable intellectual property rights of third parties, others may assert intellectual property rights that cover some of our technology, brands, products, or services. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations. Claims of intellectual property infringement might also require us to enter into costly license agreements. We also may be subject to significant damages or injunctions against development and sale of certain products.
Significant differences between actual results and estimates of the amount of future funding for our pension plans and postretirement health care benefit programs, and significant changes in funding assumptions or significant increases in funding obligations due to regulatory changes, could adversely affect our financial results. We have both funded and unfunded defined benefit pension plans that cover certain employees in North America, Europe, Asia and Brazil. We also have unfunded postretirement health care benefit plans for eligible retired employees. The Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code, as amended, govern the funding obligations for our U.S. pension plans, which are our principal pension plans. Our U.S. defined benefit plans were frozen as of December 31, 2006 for substantially all participants. For 2007 and beyond, Whirlpool employees may participate in an enhanced defined contribution plan.
As of December 31, 2015, our projected benefit obligations under our pension plans and postretirement health and welfare benefit programs exceeded the fair value of plan assets by an aggregate of approximately $1.5 billion, ($1.0 billion of which was attributable to pension plans and $0.5 billion of which was attributable to postretirement health care benefits). Estimates for the amount and timing of the future funding obligations of these pension plans and postretirement health and welfare benefit plans are based on various assumptions. These assumptions include discount rates, expected long-term rate of return on plan assets, life expectancies and health care cost trend rates. These assumptions are subject to change based on changes in interest rates on high quality bonds, stock and bond market returns, and health care cost trend rates, all of which are largely outside our control. Significant differences in results or significant changes in assumptions may materially affect our postretirement obligations and related future contributions and expenses.


12


ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our principal executive offices are located in Benton Harbor, Michigan. On December 31, 2015, our principal manufacturing operations were carried on at 43 locations in 14 countries worldwide. We occupied a total of approximately 90 million square feet devoted to manufacturing, service, sales and administrative offices, warehouse and distribution space. Over 41 million square feet of such space is occupied under lease. Whirlpool properties include facilities which are suitable and adequate for the manufacture and distribution of Whirlpool’s products. The company’s major production sites by operating segment are as follows:
North America:
 
 
United States:
 
Amana and Newton, Iowa; Tulsa, Oklahoma; Fall River, Massachusetts;
 
 
Greenville, Clyde, Findlay, Marion and Ottawa, Ohio;
 
 
Cleveland, Tennessee
Mexico:
 
Celaya; Monterrey; Ramos Arizpe
 
 
Latin America:
 
 
Brazil:
 
Itaiopolis; Joinville; Manaus; Rio Claro
China:
 
Beijing
Colombia:
 
Medellin (Joint Venture)
Italy:
 
Riva di Chieri
Slovakia:
 
Spisska Nova Ves
Mexico:
 
Monterrey
 
 
Europe, Middle East and Africa:
France:
 
Amiens
Italy:
 
Cassinetta; Comunanza; Fabriano; Naples; Siena; Teverola
Poland:
 
Lodz; Radomsko; Wroclaw
Russia:
 
Lipetsk
Slovakia:
 
Poprad
South Africa:
 
Isithebe
Turkey:
 
Manisa
United Kingdom:
 
Yates
 
 
Asia:
 
 
China:
 
ChangXing (Joint Venture); Hefei; Shunde
India:
 
Faridabad; Pondicherry; Pune
ITEM 3.
LEGAL PROCEEDINGS
Information regarding legal proceedings can be found in Note 7 to the Consolidated Financial Statements and is incorporated herein by reference.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.


13



PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
 
AND ISSUER PURCHASES OF EQUITY SECURITIES
Whirlpool’s common stock is traded on the New York Stock Exchange and the Chicago Stock Exchange. As of February 12, 2016, the number of holders of record of Whirlpool common stock was approximately 10,631.
Quarterly market and dividend information can be found in Note 15 (unaudited) to the Consolidated Financial Statements.
On April 14, 2014, our Board of Directors authorized a new share repurchase program of up to $500 million. Share repurchases are made from time to time on the open market as conditions warrant. The program does not obligate us to repurchase any of our shares. For the years ended December 31, 2015 and 2014, we repurchased 1,505,299 shares at an aggregate purchase price of approximately $250 million and 165,900 shares at an aggregate purchase price of approximately $25 million. At December 31, 2015, there were approximately $225 million in remaining funds authorized under this program.
The following table summarizes repurchases of Whirlpool's common stock in the three months ended December 31, 2015:
Period (Millions of dollars, except number and price per share)
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
October 1, 2015 through October 31, 2015
984,699

$
157.62

984,699

$
225

November 1, 2015 through November 30, 2015



225

December 1, 2015 through December 31, 2015



225

       Total
984,699

$
157.62

984,699

 
The following table summarizes repurchases of Whirlpool's common stock in the twelve months ended December 31, 2015:
Period (Millions of dollars, except number and price per share)
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
January 1, 2015 through March 31, 2015

$


$
475

April 1, 2015 through June 30, 2015
267,400

186.60

267,400

425

July 1, 2015 through September 30, 2015
253,200

177.30

253,200

380

October 1, 2015 through December 31, 2015
984,699

157.62

984,699

225

       Total
1,505,299

$
166.08

1,505,299

 










14



ITEM 6.
SELECTED FINANCIAL DATA
FIVE-YEAR SELECTED FINANCIAL DATA
 
(Millions of dollars, except share and employee data)
 
2015
 
2014
 
2013
 
2012
 
2011
CONSOLIDATED OPERATIONS
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
20,891

 
$
19,872

 
$
18,769

 
$
18,143

 
$
18,666

Restructuring costs
 
201

 
136

 
196

 
237

 
136

Depreciation and amortization
 
668

 
560

 
540

 
551

 
558

Operating profit
 
1,285

 
1,188

 
1,249

 
869

 
792

Earnings (loss) before income taxes and other items
 
1,031

 
881

 
917

 
558

 
(28
)
Net earnings
 
822

 
692

 
849

 
425

 
408

Net earnings available to Whirlpool
 
783

 
650

 
827

 
401

 
390

Capital expenditures
 
689

 
720

 
578

 
476

 
608

Dividends paid
 
269

 
224

 
187

 
155

 
148

CONSOLIDATED FINANCIAL POSITION
 
 
 
 
 
 
 
 
 
 
Current assets
 
$
7,325

 
$
8,098

 
$
7,022

 
$
6,827

 
$
6,422

Current liabilities
 
7,744

 
8,403

 
6,794

 
6,510

 
6,297

Accounts receivable, inventories and accounts payable, net
 
746

 
778

 
548

 
694

 
947

Property, net
 
3,774

 
3,981

 
3,041

 
3,034

 
3,102

Total assets
 
19,010

 
20,002

 
15,544

 
15,396

 
15,181

Long-term debt
 
3,470

 
3,544

 
1,846

 
1,944

 
2,129

Total debt(1)
 
3,998

 
4,347

 
2,463

 
2,461

 
2,491

Whirlpool stockholders’ equity
 
4,743

 
4,885

 
4,924

 
4,260

 
4,181

PER SHARE DATA
 
 
 
 
 
 
 
 
 
 
Basic net earnings available to Whirlpool
 
$
9.95

 
$
8.30

 
$
10.42

 
$
5.14

 
$
5.07

Diluted net earnings available to Whirlpool
 
9.83

 
8.17

 
10.24

 
5.06

 
4.99

Dividends
 
3.45

 
2.88

 
2.38

 
2.00

 
1.93

Book value(2)
 
59.54

 
61.39

 
60.97

 
53.70

 
53.50

Closing Stock Price—NYSE
 
146.87

 
193.74

 
156.86

 
101.75

 
47.45

KEY RATIOS
 
 
 
 
 
 
 
 
 
 
Operating profit margin
 
6.2
%
 
6.0
%
 
6.7
%
 
4.8
%
 
4.2
 %
Pre-tax margin(3)
 
4.9
%
 
4.4
%
 
4.9
%
 
3.1
%
 
(0.2
)%
Net margin(4)
 
3.7
%
 
3.3
%
 
4.4
%
 
2.2
%
 
2.1
 %
Return on average Whirlpool stockholders’ equity(5)
 
16.3
%
 
13.3
%
 
18.0
%
 
9.5
%
 
9.3
 %
Return on average total assets(6)
 
4.0
%
 
3.7
%
 
5.3
%
 
2.6
%
 
2.5
 %
Current assets to current liabilities
 
0.9

 
1.0

 
1.0

 
1.0

 
1.0

Total debt as a percent of invested capital(7)
 
41.3
%
 
42.9
%
 
33.0
%
 
36.0
%
 
36.8
 %
Price earnings ratio(8)
 
14.9

 
23.7

 
15.3

 
20.1

 
9.5

OTHER DATA
 
 
 
 
 
 
 
 
 
 
Common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
 
    Average number—on a diluted basis
 
79,667

 
79,578

 
80,761

 
79,337

 
78,143

    Year-end common shares outstanding
 
77,221

 
77,956

 
77,417

 
78,407

 
76,451

Year-end number of stockholders
 
10,663

 
11,225

 
11,889

 
12,759

 
13,527

Year-end number of employees
 
97,000

 
100,000

 
69,000

 
68,000

 
68,000

Five-year annualized total return to stockholders(9)
 
13.0
%
 
22.0
%
 
34.0
%
 
7.6
%
 
(8.1
)%

(1)    Total debt includes notes payable and current and long-term debt.
(2)    Total Whirlpool stockholders’ equity divided by average number of shares on a diluted basis.
(3)    Earnings (loss) before income taxes, as a percent of net sales.
(4)    Net earnings available to Whirlpool, as a percent of net sales.
(5)    Net earnings available to Whirlpool, divided by average Whirlpool stockholders’ equity.
(6)    Net earnings available to Whirlpool, divided by average total assets.
(7)    Total debt divided by total debt and total stockholders’ equity.
(8)    Closing stock price divided by diluted net earnings available to Whirlpool.
(9)    Stock appreciation plus reinvested dividends, divided by share price at the beginning of the period.


15


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 
RESULTS OF OPERATIONS

This Management Discussion and Analysis should be read in connection with the Consolidated Financial Statements, Notes to the Consolidated Financial Statements and Selected Financial Data included in this Form 10-K. Certain references to particular information in the Notes to the Consolidated Financial Statements are made to assist readers.
ABOUT WHIRLPOOL
Whirlpool Corporation (“Whirlpool”) is the number one major appliance manufacturer in the world with net sales of approximately $21 billion and net earnings available to Whirlpool of $783 million in 2015. We are a leading producer of major home appliances in North America, Latin America and Europe, and have a significant presence throughout China and India. We have received worldwide recognition for accomplishments in a variety of business and social efforts, including leadership, diversity, innovative product design, business ethics, social responsibility and community involvement. We conduct our business through four reportable segments, which we define based on geography. Our reportable segments consist of North America, Latin America, EMEA (Europe, Middle East and Africa) and Asia. Our customer base includes large, sophisticated trade customers who have many choices and demand competitive products, services and prices. The major home appliance industry operates in an intensely competitive environment, reflecting the impact of both new and established global competitors, including Asian and European manufacturers.
The charts below summarize the balance of net sales by reportable segment for 2015, 2014 and 2013, respectively:
We monitor country-specific economic factors such as gross domestic product, unemployment, consumer confidence, retail trends, housing starts and completions, sales of existing homes and mortgage interest rates as key indicators of industry demand. In addition to profitability, we also focus on country, brand, product and channel sales when assessing and forecasting financial results.
Our leading portfolio of brands includes Whirlpool, Maytag, KitchenAid, Embraco, Brastemp, Consul and Indesit, each of which generated annual revenues in excess of $1 billion. Our global branded consumer products strategy is to introduce innovative new products, increase brand customer loyalty, expand our presence outside the United States, enhance our trade management platform, improve total cost and quality by expanding and leveraging our global operating platform and, where appropriate, make strategic acquisitions and investments.
As we grow revenues in our core products, our strategy is to extend our business by offering products and services that are dependent on and related to our core business and expand into adjacent products, such as Affresh cleaners and Gladiator GarageWorks, through businesses that leverage our core competencies and business infrastructure.
OVERVIEW
Whirlpool delivered strong results in 2015, driving revenue growth, margin expansion and strong cash generation by leveraging our industry leading brand portfolio and innovative new products within our core appliance and adjacent businesses. We achieved these results through strong focus and decisive action plans in a global environment that saw rapid emerging markets demand decline and strengthening of U.S. dollar against most global currencies. Over the past year, we made moves to reshape our global operating footprint, respond to shifts in the operating environment and invest in our brands and products. We made substantial progress toward integrating Indesit in Europe and Hefei Sanyo in China, our 2014 acquisitions, that create leading


16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

positions as a western company, in those markets. We have great opportunities for growth as demand in the U.S. continues to recover and we are very well positioned to capitalize when growth returns to emerging markets such as Brazil, China, and Russia.
We believe that continued execution of our business priorities and a focus on long-term growth will allow the Company to adapt to changes in the macroeconomic environment and continue to create shareholder value.
RESULTS OF OPERATIONS
The following table summarizes the consolidated results of operations:
 
 
December 31,
Consolidated - Millions of dollars (except per share data)
 
2015
 
Better/(Worse)
 
2014
 
Better/(Worse)
 
2013
Net sales
 
$
20,891

 
5.1%
 
$
19,872

 
5.9%
 
$
18,769

Gross margin
 
3,690

 
8.7
 
3,395

 
2.9
 
3,298

Selling, general and administrative
 
2,130

 
(4.6)
 
2,038

 
(11.5)
 
1,828

Restructuring costs
 
201

 
(48.2)
 
136

 
30.9
 
196

Interest and sundry income (expense)
 
(89
)
 
36.7
 
(142
)
 
8.6
 
(155
)
Interest expense
 
(165
)
 
(0.2)
 
(165
)
 
6.7
 
(177
)
Income tax expense
 
209

 
10.1
 
189

 
nm
 
68

Net earnings available to Whirlpool
 
783

 
20.4
 
650

 
(21.3)
 
827

Diluted net earnings available to Whirlpool per share
 
$
9.83

 
20.3%
 
$
8.17

 
(20.2)%
 
$
10.24

nm: not meaningful
Consolidated Net Sales
The following tables summarize units sold and consolidated net sales by operating segment:
 
 
December 31,
Units Sold - In thousands
 
2015
 
Better/(Worse)
 
2014
 
Better/(Worse)
 
2013
North America
 
27,273

 
1.4
 %
 
26,892

 
3.8
 %
 
25,895

EMEA
 
25,145

 
59.7

 
15,744

 
32.2

 
11,907

Latin America
 
10,084

 
(21.3
)
 
12,821

 
(4.5
)
 
13,422

Asia
 
7,770

 
78.8

 
4,346

 
11.0

 
3,917

Consolidated
 
70,272

 
17.5
 %
 
59,803

 
8.5
 %
 
55,141

 
 
December 31,
Consolidated Net Sales - Millions of dollars
 
2015
 
Better/(Worse)
 
2014
 
Better/(Worse)
 
2013
North America
 
$
10,732

 
0.9
 %
 
$
10,634

 
4.5
 %
 
$
10,178

EMEA
 
5,601

 
43.4

 
3,905

 
29.1

 
3,024

Latin America
 
3,349

 
(28.5
)
 
4,686

 
(4.9
)
 
4,928

Asia
 
1,417

 
73.6

 
816

 
1.2

 
807

Other/eliminations
 
(208
)
 
nm
 
(169
)
 
nm
 
(168
)
Consolidated
 
$
20,891

 
5.1
 %
 
$
19,872

 
5.9
 %
 
$
18,769

nm: not meaningful
Consolidated net sales increased 5.1% compared to 2014 primarily driven by increased volume due to acquisitions and favorable product price/mix, partially offset by the unfavorable impact of foreign currency and a weakened demand environment in emerging markets. Excluding the impact of foreign currency, consolidated net sales increased 18.1% compared to 2014. Consolidated net sales for 2014 increased 5.9% compared to 2013 primarily due to favorable product price/mix, increased volume due to acquisitions, partially offset by the unfavorable impact of foreign currency and lower BEFIEX credits. Excluding the impact of foreign currency and BEFIEX credits, consolidated net sales for 2014 increased 8.4% compared to 2013.


17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

We provide the percentage change in net sales, excluding the impact of foreign currency and BEFIEX credits, as a supplement to the change in net sales as determined by U.S. generally accepted accounting principles ("GAAP") to provide stockholders with a clearer basis to assess Whirlpool's results over time. This measure is considered a non-GAAP financial measure and is calculated by translating the current period net sales excluding BEFIEX credits, in functional currency, to U.S. dollars using the prior-year period's exchange rate compared to the prior-year period net sales excluding BEFIEX credits.
Significant regional trends were as follows:
North America net sales increased 0.9% compared to 2014 primarily due to a 1.4% increase in units sold and favorable product price/mix, partially offset by foreign currency. Excluding the impact of foreign currency, net sales increased 3.2% in 2015. North America net sales for 2014 increased 4.5% compared to 2013 primarily due to a 3.8% increase in units sold and favorable product/price mix, partially offset by foreign currency. Excluding the impact of foreign currency, net sales increased 5.1% in 2014.
EMEA net sales increased 43.4% compared to 2014, primarily due to a 59.7% increase in units sold due to the acquisition of Indesit and favorable product mix, partially offset by unfavorable foreign currency. Excluding the impact of foreign currency, net sales increased 75.3% in 2015. In 2014 EMEA net sales increased 29.1% compared to 2013, primarily due to a 32.2% increase in units sold due to the acquisition of Indesit, partially offset by unfavorable product/price mix and foreign currency. Excluding the impact of foreign currency, net sales increased 29.6% in 2014.
Latin America net sales decreased 28.5% compared to 2014 primarily due to a 21.3% decrease in units sold and unfavorable foreign currency, partially offset by favorable product mix. Excluding the impact of foreign currency, Latin America net sales decreased 5.9% in 2015. Latin America net sales for 2014 decreased 4.9% compared to 2013 primarily due to a 4.5% decrease in units sold, lower BEFIEX credits and unfavorable foreign currency, partially offset by favorable product price/mix. Excluding the impact of foreign currency and BEFIEX credits, Latin America net sales increased 2.5% in 2014.
We recognized approximately $0, $14 million and $109 million of BEFIEX credits in 2015, 2014 and 2013, respectively. As of December 31, 2015, approximately $34 million of future cash monetization remained for court awarded fees, which is not expected to be payable for several years. For additional information regarding BEFIEX credits, see Notes 7 and 12 of the Notes to the Consolidated Financial Statements.
Asia net sales increased 73.6% compared to 2014 primarily due to the acquisition of Hefei Sanyo. Excluding the impact of foreign currency, Asia net sales increased 78.3% in 2015. Asia net sales for 2014 increased 1.2% compared to 2013 primarily due to the acquisition of Hefei Sanyo, partially offset by foreign currency, product transition costs and unfavorable product price/mix. Excluding the impact of foreign currency, Asia net sales increased 4.1% in 2014.
Gross Margin
The table below summarizes gross margin percentages by region:
 
 
December 31,
Percentage of net sales
 
2015
 
Change
 
2014
 
Change
 
2013
North America
 
18.9
%
 
1.5 pts


17.4
%
 
(0.7) pts

 
18.1
%
EMEA
 
14.7

 

 
14.7

 
3.5

 
11.2

Latin America
 
14.9

 
(2.9
)
 
17.8

 
(1.6
)
 
19.4

Asia
 
23.4

 
7.5

 
15.9

 
(2.7
)
 
18.6

Consolidated
 
17.7
%
 
0.6 pts

 
17.1
%
 
(0.5) pts

 
17.6
%
The consolidated gross margin percentage increased 60 basis points to 17.7% compared to 2014, primarily due to ongoing cost productivity, favorable product price/mix, acquisition synergies and capacity optimization initiatives, partially offset by foreign currency.
Significant regional trends were as follows:
North America gross margin increased compared to 2014 primarily due to ongoing cost productivity and recognition of postretirement-benefit curtailment gains, partially offset by unfavorable foreign currency. North America gross margin for 2014 decreased compared to 2013 primarily due to the impact of product transitions, partially offset by productivity.


18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

EMEA gross margin was flat compared to 2014 primarily due to benefits from the Indesit acquisition, favorable product price/mix, ongoing cost productivity, and capacity optimization initiatives, partially offset by unfavorable foreign currency, legacy Indesit product corrective action costs and increased investments in marketing, technology and products. During 2014, EMEA gross margin increased compared to 2013 primarily due to increased productivity, acquisition synergies and restructuring benefits, partially offset by unfavorable product price/mix and unfavorable foreign currency.
Latin America gross margin decreased compared to 2014 primarily due to unfavorable foreign currency and the weakened demand environment in Brazil, partially offset by higher product price/mix. During 2014, Latin America gross margin decreased compared to 2013 primarily due to lower BEFIEX credits, higher material costs and unfavorable foreign currency, partially offset by higher product price/mix.
Asia gross margin increased in 2015 when compared to 2014, primarily due to acquisition synergies, partially offset by increased investments in marketing, technology and products. During 2014, Asia gross margin decreased compared to 2013 primarily due to expenses related to the acquisition of Hefei Sanyo, foreign currency and unfavorable material costs, partially offset by favorable product price/mix, productivity and acquisition synergies.
Selling, General and Administrative
The following table summarizes selling, general and administrative expenses as a percentage of sales by region:
 
 
December 31,
Millions of dollars
 
2015
 
As a %
of Net Sales
 
2014
 
As a %
of Net Sales
 
2013
 
As a %
of Net Sales
North America
 
$
762

 
7.1%
 
$
761

 
7.2%
 
$
758

 
7.5%
EMEA
 
604

 
10.8
 
506

 
13.0
 
338

 
11.2
Latin America
 
315

 
9.4
 
359

 
7.7
 
399

 
8.1
Asia
 
226

 
16.0
 
146

 
17.9
 
116

 
14.4
Corporate/other
 
223

 
 
266

 
 
217

 
Consolidated
 
$
2,130

 
10.2%
 
$
2,038

 
10.3%
 
$
1,828

 
9.7%
Consolidated selling, general and administrative expenses as a percent of consolidated net sales in 2015 remained flat compared to 2014 reflecting the favorable impact of acquisition synergies, partially offset by foreign currency. Selling, general and administrative expenses as a percent of consolidated net sales in 2014 increased compared to 2013, reflecting acquisition-related costs and investment expenses.
Restructuring
During 2014 and the twelve months ended December 31, 2015, we announced the following restructuring plans: (a) the closure of a microwave oven manufacturing facility and other organizational efficiency actions in EMEA and Latin America, (b) organizational integration activities in China and Europe to support the integration of the acquisitions of Hefei Sanyo, which we have since renamed Whirlpool (China) Co., Ltd. ("Whirlpool China") and Indesit, and (c) the closure of a research and development facility in Germany in 2016.
In the second quarter of 2015, we committed to a restructuring plan to integrate our Italian legacy operations with those of Indesit. The industrial restructuring plan, which was approved by the relevant labor unions in July 2015 and signed by the Italian government in August 2015, provides for the closure or repurposing of certain manufacturing facilities and headcount reductions at other facilities. In addition, the restructuring plan provides for headcount reductions in the salaried employee workforce.
We estimate that we will incur up to €179 million (approximately $194 million as of December 31, 2015) in employee-related costs, €25 million (approximately $27 million as of December 31, 2015) in asset impairment costs, and €37 million (approximately $40 million as of December 31, 2015) in other associated costs in connection with these actions. Completion of these plans is expected by the end of 2018. We estimate €209 million (approximately $227 million as of December 31, 2015) of the estimated €241 million total cost will result in future cash expenditures.
We incurred restructuring charges of $201 million, $136 million, and $196 million for the years ended December 31, 2015, 2014 and 2013, respectively.


19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

For the full year 2016, we expect to incur up to $200 million of restructuring charges, which will result in ongoing substantial cost reductions. Additional information about restructuring activities can be found in Note 11 of the Notes to the Consolidated Financial Statements.
Interest and Sundry Income (Expense)
Interest and sundry income (expense) decreased $53 million compared to 2014, primarily due to a $64 million gain related to a business investment in Brazil during the second quarter of 2015, and previous year investment expenses related to the Hefei Sanyo and Indesit acquisitions during 2014, partially offset by impact from foreign currency. During 2014, interest and sundry income (expense) decreased $13 million compared to 2013, primarily driven by lower charges related to Embraco antitrust matters and a Brazilian government settlement occurring in 2013.
For additional information about the Embraco antitrust matters and the Brazilian government settlement, see Note 7 of the Notes to the Consolidated Financial Statements. For additional information about the acquisitions of Hefei Sanyo and Indesit, see Note 2 of the Notes to the Consolidated Financial Statements.
Interest Expense
Interest expense was unchanged compared to 2014. This was a result of higher average long-term debt balances, offset by lower average interest rates on long-term debt. During 2014, interest expense decreased $12 million compared to 2013, primarily due to lower interest rates.
Income Taxes
Income tax expense was $209 million, $189 million, and $68 million in 2015, 2014 and 2013, respectively. The increase in tax expense in 2015 compared to 2014 is primarily due to higher pre-tax earnings, partially offset by a lower effective tax rate.
The increase in tax expense in 2014 compared to 2013 is primarily due to the absence of United States energy tax credits recognized in 2013.
The "American Taxpayer Relief Act of 2012," signed in January 2013, reinstated the energy tax credit for 2012 and 2013, and resulted in a tax credit benefit related to the production of qualifying appliances in 2012 and 2013 in the combined amount of $126 million, all of which was recognized in 2013. For additional information about our consolidated tax provision, see Note 12 of the Notes to the Consolidated Financial Statements.
The following table summarizes the difference between income tax expense at the United States statutory rate of 35% and the income tax expense at effective worldwide tax rates for the respective periods:
Millions of dollars
 
2015
 
2014
 
2013
Earnings before income taxes
 
 
 
 
 
 
United States
 
$
555

 
$
325

 
$
149

Foreign
 
476

 
556

 
768

Earnings before income taxes
 
1,031

 
881

 
917

 
 
 
 
 
 
 
Income tax computed at United States statutory rate
 
361

 
308

 
321

U.S. government tax incentives, including Energy Tax Credits
 
(13
)
 
(10
)
 
(142
)
Foreign government tax incentives, including BEFIEX
 
(19
)
 
(46
)
 
(63
)
Foreign tax rate differential
 
(36
)
 
(17
)
 
(17
)
U.S. foreign tax credits
 
(103
)
 
(148
)
 
(231
)
Valuation allowances
 
(95
)
 
9

 
16

State and local taxes, net of federal tax benefit
 
18

 
5

 
7

Foreign withholding taxes
 
16

 
16

 
29

U.S. tax on foreign dividends and subpart F income
 
57

 
56

 
195

Settlement of global tax audits
 
16

 
(5
)
 
(54
)
Other items, net
 
7

 
21

 
7

Income tax expense computed at effective worldwide tax rates
 
$
209

 
$
189

 
$
68



20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

FORWARD-LOOKING PERSPECTIVE
We currently estimate earnings per diluted share and industry demand for 2016 to be within the following ranges:
 
2016
 
Current Outlook
Estimated earnings per diluted share, for the year ending December 31, 2016
$11.25
$12.00
Including:
 
 
 
Restructuring Expense
$(2.40)
Combined Acquisition Related Transition Costs
$(0.30)
 
 
 
 
Industry demand
 
 
 
North America
+5%
EMEA
0%
+2%
Latin America (1)
(10%)
Asia
Flat
(1) Primarily reflects industry demand in Brazil. 
For the full-year 2016, we expect to generate free cash flow between $700 million and $800 million, including restructuring cash outlays of up to $200 million, capital expenditures of $700 million to $750 million and EMEA legacy product warranty costs of $155 million.
The table below reconciles projected 2016 cash provided by operating activities determined in accordance with GAAP to free cash flow, a non-GAAP measure. Management believes that free cash flow provides stockholders with a relevant measure of liquidity and a useful basis for assessing Whirlpool’s ability to fund its activities and obligations. There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similarly named non-GAAP measures whose calculations may differ from our calculations. We define free cash flow as cash provided by continuing operations less capital expenditures and including proceeds from the sale of assets/businesses, and changes in restricted cash. The change in restricted cash relates to the private placement funds paid by Whirlpool to acquire majority control of Hefei Sanyo in 2014 and which are used to fund capital and technical resources to enhance Whirlpool China’s research and development and working capital.
 
2016
Millions of dollars
Current Outlook
Cash provided by operating activities
$
1,400

$
1,550

Capital expenditures, proceeds from sale of assets/businesses and changes in restricted cash
(700
)
(750
)
Free cash flow
$
700

$
800

The projections above are based on many estimates and are inherently subject to change based on future decisions made by management and the Board of Directors of Whirlpool, and significant economic, competitive and other uncertainties and contingencies.
FINANCIAL CONDITION AND LIQUIDITY
Our objective is to finance our business through operating cash flow and the appropriate mix of long-term and short-term debt. By diversifying the maturity structure, we avoid concentrations of debt, reducing liquidity risk. We have varying needs for short-term working capital financing as a result of the nature of our business. We regularly review our capital structure and liquidity priorities, which include funding the business through capital and engineering spending to support innovation and productivity initiatives, funding our pension plan and term debt liabilities, providing return to shareholders and potential acquisitions.
On October 24, 2014, Whirlpool's wholly-owned subsidiary completed its acquisition of a 51% equity stake in Whirlpool China. The aggregate purchase price for the transaction was RMB 3.4 billion (approximately $551 million at the dates of purchase for each step of the transaction). The Company funded the total consideration for the shares with cash on hand. The cash paid for the private placement step of the transaction is considered restricted cash, which is used to fund capital and technical resources to enhance Whirlpool China’s research and development and working capital. Additional information about the transaction can be found in Note 2 of the Notes to the Consolidated Financial Statements.


21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

In July 2015, Whirlpool China suspended trading of its stock pursuant to listing rules of the Shanghai Stock Exchange in connection with its response to a notification from China's securities regulatory agency to all listed companies aimed at addressing volatility in China's securities market. In December 2015, Whirlpool China resumed trading of its stock in accordance with relevant Chinese laws and the Shanghai Stock Exchange's listing rules.
On December 3, 2014, Whirlpool completed the final step in its acquisition of Indesit. Total consideration paid for Indesit was €1.1 billion (approximately $1.4 billion at the dates of purchase of each step in the transaction) in aggregate net of cash acquired. The Company funded the aggregate purchase price for Indesit through borrowings under its credit facility and commercial paper programs, and repaid a portion of such borrowings through the issuance of an aggregate principal amount of $650 million in senior notes on November 4, 2014 and an aggregate principal amount of €500 million (approximately $525 million as of the date of issuance) in senior notes on March 12, 2015. Additional information about the transaction can be found in Note 2 of the Notes to the Consolidated Financial Statements.
Our short term potential uses of liquidity include funding our ongoing capital spending, restructuring activities, funding pension plans and returns to shareholders. We also have $508 million of term debt maturing in the next twelve months.
We monitor the credit ratings and market indicators of credit risk of our lending, depository, and derivative counterparty banks regularly. In addition, we diversify our deposits and investments in short term cash equivalents to limit the concentration of exposure by counterparty.
We continue to monitor general financial instability and uncertainty globally. As of December 31, 2015, the only country where we had cash or cash equivalents greater than 1% of our consolidated assets was China, which represented 1.9%. In addition, we did not have any third-party accounts receivable greater than 1% of our consolidated assets in any single country outside of North America, with the exception of Italy, which represented 1.5%.
We also continue to review customer conditions across the Eurozone. As of December 31, 2015, we had €79 million (approximately $86 million as of December 31, 2015) in outstanding trade receivables and short-term and long-term notes due to us associated with Alno AG, a long-standing European customer. Approximately €33 million (approximately $36 million as of December 31, 2015) of the outstanding receivables were overdue as of December 31, 2015. In the fourth quarter of 2014, Whirlpool and Alno entered into an agreement to revise the previous standstill agreement to amend the payment terms of the overdue trade receivables. The new agreement cured the violation of the prior agreement and Alno's overdue balance remains due in full by the end of the fourth quarter of 2016. Our exposure includes not only the outstanding receivables but also the potential risks of an Alno bankruptcy and impacts to our distribution process. Alno is proceeding to secure additional financing to improve its financial position. 
In 2014, Whirlpool sold shares held in Alno AG, which resulted in the conversion of our investment from the equity method of accounting to an available for sale investment due to our less than 20% overall investment in Alno AG.
The Company had cash and cash equivalents of $772 million at December 31, 2015, of which $726 million was held by subsidiaries in foreign countries. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate these funds to fund our U.S. operations. However, if these funds were repatriated, then we would be required to accrue and pay applicable United States taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various countries. The repatriation could result in an adjustment to the tax liability after considering available foreign tax credits and other tax attributes. It is not practicable to estimate the amount of the deferred tax liability associated with these unremitted earnings due to the complexity of its hypothetical calculation.
Sources and Uses of Cash
We met our cash needs during 2015 through cash flows from operations, cash and cash equivalents, and financing arrangements. Our cash and cash equivalents at December 31, 2015 decreased $254 million compared to the same period in 2014. Significant drivers of changes in our cash and cash equivalents balance during 2015 are discussed below:


22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

Cash Flow Summary
Millions of dollars
 
2015
 
2014
 
2013
Cash provided by (used in):
 
 
 
 
 
 
Operating activities
 
$
1,225

 
$
1,479

 
$
1,262

Investing activities
 
(681
)
 
(2,456
)
 
(582
)
Financing activities
 
(707
)
 
705

 
(434
)
Effect of exchange rate changes
 
(91
)
 
(82
)
 
(34
)
Net increase (decrease) in cash and cash equivalents
 
$
(254
)
 
$
(354
)
 
$
212

Cash Flows from Operating Activities
The decrease in cash provided by operating activities during 2015 reflects strong cash earnings, partially offset by changes in working capital and $72 million to fund our United States qualified pension plans.
The timing of cash flows from operations varies significantly throughout the year primarily due to changes in production levels, sales patterns, promotional programs, funding requirements as well as receivable and payment terms. Depending on timing of cash flows, the location of cash balances, as well as the liquidity requirements of each country, external sources of funding are used to support working capital requirements.
Cash Flows from Investing Activities
Changes in cash used in investing activities primarily reflect capital investments in each year, and the acquisitions of Indesit and Hefei Sanyo in 2014.
Cash Flows from Financing Activities
Cash used in financing activities during 2015 primarily reflects share repurchase activity under our new share repurchase program. Cash provided by financing activities during 2014 primarily reflect funding required to complete the acquisitions of Hefei Sanyo and Indesit. Cash used in financing activities during 2013 primarily reflects share repurchase activity under our previous share repurchase program.
Financing Arrangements
We have committed credit facilities in Brazil, which provide borrowings up to 1.0 billion Brazilian reais (approximately $256 million as of December 31, 2015) maturing at various times from 2016 to 2017. The credit facilities contain no financial covenants and we had no borrowings outstanding under these credit facilities at December 31, 2015 and 2014.
On September 25, 2015, we entered into an Amended and Restated Short-Term Credit Agreement (the “Amended 364-Day Facility”). The Amended 364-Day Facility has a maturity date of September 23, 2016, aggregate borrowing capacity of $500 million and amends and restates in its entirety the Short-Term Credit Agreement entered into on September 26, 2014 (the “Original 364-Day Facility”).
Collectively, the $500 million Amended 364-Day Facility, a €250 million European facility added in July 2015 and the existing $2.0 billion long-term credit facility provide total committed credit facilities of approximately $2.8 billion (the “Facilities”), which is fundamentally unchanged from the $3.0 billion in committed credit facilities available as of December 31, 2014. The resulting Facilities are sufficient, more geographically diverse, and better reflect our growing global operations. 
The interest and fee rates payable with respect to the Amended 364-Day Facility based on our current debt rating are unchanged from the Original 364-Day Facility and are as follows: (1) the spread over LIBOR is 1.250%; (2) the spread over prime is 0.250%; and (3) the unused commitment fee is 0.125%, as of the date hereof. The Amended 364-Day Facility contains customary covenants and warranties including, among other things, a rolling twelve month maximum leverage ratio limited to 3.25 to 1.0 for each fiscal quarter and a rolling twelve month interest coverage ratio required to be greater than or equal to 3.0 to 1.0 for each fiscal quarter. In addition, the covenants limit our ability to (or to permit any subsidiaries to), subject to various exceptions and limitations: (i) merge with other companies; (ii) create liens on its property; (iii) incur debt or off-balance sheet obligations at the subsidiary level; (iv) enter into transactions with affiliates, except on an arms-length basis; (v) enter into agreements restricting the payment of subsidiary dividends or restricting the making of loans or repayment of debt by subsidiaries; and (vi) enter into agreements restricting the creation of liens on its assets. We are in compliance with financial covenant requirements at December 31, 2015 and 2014.


23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

On September 26, 2014, we entered into a Second Amended and Restated Long-Term Credit Agreement (the “Long-Term Facility”). The Long-Term Facility amends, restates and extends the Company's prior five-year credit facility, which was scheduled to mature on June 28, 2016. The Long-Term Facility increased the prior $1.7 billion facility to an aggregate amount of $2.0 billion, with an option to increase the total amount to up to $2.5 billion by exercise of an accordion feature. The Long-Term Facility has a maturity date of September 26, 2019. The Long-Term Facility includes a letter of credit sublimit of $200 million. The interest and fee rates payable with respect to the Long-Term Facility based on our debt rating are as follows: (1) the spread over LIBOR is 1.250%; (2) the spread over prime is 0.250%; and (3) the unused commitment fee is 0.15%, as of the effective date of the Long-Term Facility.
We had no borrowings outstanding under the Amended 364-Day Facility or the Long-Term Facility at December 31, 2015 or 2014, respectively.
On May 15, 2015, $200 million of 5.00% notes matured and were repaid. On March 12, 2015, we completed a debt offering of €500 million (approximately $525 million as of the date of issuance) principal amount of 0.625% notes due in 2020. The notes contain covenants that limit our ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest. The notes are registered under the Securities Act of 1933, as amended, pursuant to our Registration Statement on Form S-3 (File No. 333-181339) filed with the Securities and Exchange Commission (the “Commission”) on May 11, 2012.
On February 25, 2014, we completed a debt offering of $250 million principal amount of 1.35% notes due in 2017, $250 million principal amount of 2.40% notes due in 2019, and $300 million principal amount of 4.00% notes due in 2024. On May 1, 2014, $500 million of 8.60% notes matured and were repaid. On August 15, 2014, $100 million of 6.45% notes matured and were repaid.
On November 4, 2014, we completed a debt offering of $300 million principal amount of 1.65% notes due in 2017 and $350 million principal amount of 3.70% notes due in 2025. These notes contain covenants that limit our ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest.
In the fourth quarter of 2014, we assumed €300 million principal amount of 4.5% guaranteed notes due on April 26, 2018 from the Indesit acquisition. During the first quarter of 2015, holders of the notes passed a resolution which amended the terms and conditions of the notes so that they are better aligned to the terms and conditions of notes and bonds issued by Whirlpool Corporation. As a result of the passage of the resolution, Whirlpool has agreed to be a guarantor of the notes. These notes contain covenants that limit our ability to incur certain liens or enter into certain sale and lease-back transactions. In addition, if we experience a specific kind of change of control, we are required to make an offer to purchase all of the notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest.
For additional information about our financing arrangements, see Note 6 of the Notes to the Consolidated Financial Statements.
Dividends
In April 2015, our Board of Directors approved a 20% increase in our quarterly dividend on our common stock to 90 cents per share from 75 cents per share.
Repurchase Program
On April 14, 2014, our Board of Directors authorized a new share repurchase program of up to $500 million. Share repurchases are made from time to time on the open market as conditions warrant. The program does not obligate us to repurchase any of our shares. For the years ended December 31, 2015 and 2014, we repurchased 1,505,299 shares at an aggregate purchase price of approximately $250 million and 165,900 shares at an aggregate purchase price of approximately $25 million. At December 31, 2015, there were approximately $225 million in remaining funds authorized under this program.
Supplier Financing
We offer our suppliers access to third party payables processors. Independent of Whirlpool, the processors allow suppliers to sell their receivables to financial institutions at the discretion of only the supplier and the financial institution. We have no economic interest in the sale of these receivables and no direct financial relationship with the financial institutions concerning these services. All of our obligations, including amounts due, remain to our suppliers as stated in our supplier


24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)

agreements. As of December 31, 2015 and 2014, approximately $1.2 billion and $1.6 billion, respectively, are outstanding under the programs with participating financial institutions.
CONTRACTUAL OBLIGATIONS AND FORWARD-LOOKING CASH REQUIREMENTS
The following table summarizes our expected cash outflows resulting from financial contracts and commitments:
 
 
Payments due by period
Millions of dollars
 
Total
 
2016
 
2017 &
2018
 
2019 &
2020
 
Thereafter
Long-term debt obligations(1)
 
$
4,709

 
$
601

 
$
1,060

 
$
929

 
$
2,119

Operating lease obligations
 
929

 
218

 
317

 
198

 
196

Purchase obligations(2)
 
986

 
248

 
326

 
226

 
186

Brazilian government settlement(3)
 
6

 
6

 


 

 

United States & Foreign pension plans(4)
 
830

 
17

 
125

 
200

 
488

Other postretirement benefits(5)
 
374

 
52

 
96

 
79

 
147

Legal settlements(6)
 
29

 
29

 

 

 

Total(7)
 
$
7,863

 
$
1,171

 
$
1,924

 
$
1,632

 
$
3,136

(1) 
Interest payments related to long-term debt are included in the table above. For additional information about our financing arrangements, see Note 6 of the Notes to the Consolidated Financial Statements.
(2) 
Purchase obligations include our “take-or-pay” contracts with materials vendors and minimum payment obligations to other suppliers.
(3) 
Represents payments agreed to under a Brazil government settlement program. See Note 7 of the Notes to the Consolidated Financial Statements for additional information.
(4) 
Represents the minimum contributions required for foreign and domestic pension plans based on current interest rates, asset return assumptions, legislative requirements and other actuarial assumptions at December 31, 2015. Management may elect to contribute amounts in addition to those required by law. See Note 13 of the Notes to the Consolidated Financial Statements for additional information.
(5) 
Represents our portion of expected benefit payments under our retiree healthcare plans.
(6) 
For additional information regarding legal settlements, see Note 7 of the Notes to the Consolidated Financial Statements.
(7) 
This table does not include short-term credit facility and commercial paper borrowings. For additional information about short-term borrowings, see Note 6 of the Notes to the Consolidated Financial Statements. This table does not include future anticipated income tax settlements; see Note 12 of the Notes to the Consolidated Financial Statements.
WHIRLPOOL CHINA ACQUISITION
On August 12, 2013, Whirlpool's wholly-owned subsidiary, Whirlpool China, reached agreements to acquire a 51% equity stake in a leading home appliances manufacturer, Hefei Sanyo, a joint stock company whose shares are listed and traded on the Shanghai Stock Exchange. This transaction was completed on October 24, 2014. Hefei Sanyo has since been renamed to "Whirlpool China Co., Ltd." The aggregate purchase price was RMB 3.4 billion (approximately $551 million at the dates of purchase). The Company funded the total consideration for the shares with cash on hand. The cash paid for the private placement portion of the transaction is considered restricted cash, which will be used to fund capital and technical resources to enhance Whirlpool China’s research and development and working capital.
We expect the acquisition will accelerate Whirlpool’s profitable growth in the Chinese appliance market. During 2014, Whirlpool began integrating the manufacturing, administrative, supply chain and technology operations of Hefei Sanyo. The results of Hefei Sanyo’s operations have been included in the Consolidated Financial Statements beginning October 24, 2014.
Hefei Sanyo has an established and broad distribution network that includes more than 30,000 outlets throughout China. Their significant presence in rural areas complements Whirlpool’s presence in China’s higher-tier cities. With this acquisition, Whirlpool also gains manufacturing scale and a competitive cost structure in the city of Hefei. The ability to consolidate operations offers strong synergies as Whirlpool will provide extensive technical, marketing and product development, combined with Hefei Sanyo’s sales execution and operational strengths, to support the next phase of development in the advancement of Whirlpool China as an important global production and research and development center for the home appliance sector.
Further discussion of this transaction can be found in Note 2 of the Notes to the Consolidated Financial Statements.
INDESIT ACQUISITION
On December 3, 2014, Whirlpool completed the final step in its acquisition of Indesit. Total consideration paid for Indesit was €1.1 billion (approximately $1.4 billion at the dates of purchase of each step in the transaction) in aggregate net of cash


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acquired. The Company funded the aggregate purchase price for Indesit through borrowings under its credit facility and commercial paper programs, and repaid a portion of such borrowings through the issuance of an aggregate principal amount of $650 million in senior notes on November 4, 2014 and an aggregate principal amount of €500 million (approximately $525 million as of the date of issuance) in senior notes on March 12, 2015. Additional information about the transaction can be found in Note 2 of the Notes to the Consolidated Financial Statements.
The acquisition builds our market position and will enable growth in EMEA. The results of Indesit’s operations have been included in the Consolidated Financial Statements beginning October 14, 2014.
Further discussion of this transaction can be found in Note 2 of the Notes to the Consolidated Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
We have guarantee arrangements in a Brazilian subsidiary. As a standard business practice in Brazil, the subsidiary guarantees customer lines of credit at commercial banks to support purchases following its normal credit policies. If a customer were to default on its line of credit with the bank, our subsidiary would be required to satisfy the obligation with the bank and the receivable would revert back to the subsidiary. At December 31, 2015 and December 31, 2014, the guaranteed amounts totaled $260 million and $492 million, respectively. Our subsidiary insures against credit risk for these guarantees, under normal operating conditions, through policies purchased from high-quality underwriters. We had no losses associated with these guarantees in 2015 or 2014.
We have guaranteed a $43 million five-year revolving credit facility between certain financial institutions and a not-for-profit entity in connection with a community and economic development project (“Harbor Shores”). The credit facility, which originated in 2008, was amended in 2015 by Harbor Shores and reduced to $43 million, was refinanced in December 2012 and we renewed our guarantee through 2017. The fair value of the guarantee is nominal. The purpose of Harbor Shores is to stimulate employment and growth in the areas of Benton Harbor and St. Joseph, Michigan. In the event of default, we must satisfy the guarantee of the credit facility up to the amount borrowed at the date of default.
In the ordinary course of business, we enter into agreements with financial institutions to issue bank guarantees, letters of credit and surety bonds. These agreements are primarily associated with unresolved tax matters in Brazil, as is customary under local regulations, and governmental obligations related to certain employee benefit arrangements. As of December 31, 2015 and 2014, we had approximately $290 million and $401 million outstanding under these agreements, respectively.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make certain estimates and assumptions. We periodically evaluate these estimates and assumptions, which are based on historical experience, changes in the business environment and other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates.
 Pension and Other Postretirement Benefits
Accounting for pensions and other postretirement benefits involves estimating the costs of future benefits and attributing the cost over the employee’s expected period of employment. The determination of our obligation and expense for these costs requires the use of certain assumptions. Those assumptions include the discount rate, expected long-term rate of return on plan assets, life expectancy, and health care cost trend rates. These assumptions are subject to change based on interest rates on high quality bonds, stock and bond markets and medical cost inflation, respectively. Actual results that differ from our assumptions are accumulated and amortized over future periods and therefore, generally affect our recognized expense and accrued liability in such future periods. While we believe that our assumptions are appropriate given current economic conditions and actual experience, significant differences in results or significant changes in our assumptions may materially affect our pension and other postretirement benefit obligations and related future expense.


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Our pension and other postretirement benefit obligations at December 31, 2015 and preliminary retirement benefit costs for 2016 were prepared using the assumptions that were determined as of December 31, 2015. The following table summarizes the sensitivity of our December 31, 2015 retirement obligations and 2016 retirement benefit costs of our United States plans to changes in the key assumptions used to determine those results:
 
 
 
 
Estimated increase (decrease) in
Millions of dollars
 
Percentage
Change
 
2016 Expense
 
PBO/APBO*
for 2015
United States Pension Plans
 
 
 
 
 
 
Discount rate
 
+/-50bps
 
$ (0)/1
 
$ (182)/208
Expected long-term rate of return on plan assets
 
+/-50bps
 
(13)/13
 
United States Other Postretirement Benefit Plan
 
 
 
 
 
 
Discount rate
 
+/-50bps
 
1/(1)
 
(13)/15
Health care cost trend rate
 
+/-100bps
 
 
1/(1)
*
Projected benefit obligation (PBO) for pension plans and accumulated postretirement benefit obligation (APBO) for other postretirement benefit plans.
These sensitivities may not be appropriate to use for other years’ financial results. Furthermore, the impact of assumption changes outside of the ranges shown above may not be approximated by using the above results. For additional information about our pension and other postretirement benefit obligations, see Note 13 of the Notes to the Consolidated Financial Statements.
Income Taxes
We estimate our income taxes in each of the taxing jurisdictions in which we operate. This involves estimating actual current tax expense together with assessing any temporary differences resulting from the different treatment of certain items, such as the timing for recognizing expenses, for tax and accounting purposes. These differences may result in deferred tax assets or liabilities, which are included in our Consolidated Balance Sheets. We are required to assess the likelihood that deferred tax assets, which include net operating loss carryforwards, foreign tax credits and deductible temporary differences, that are expected to be realizable in future years. Realization of our net operating loss and foreign tax credit deferred tax assets is supported by specific tax planning strategies and, where possible, considers projections of future profitability. If recovery is not more likely than not, we provide a valuation allowance based on estimates of future taxable income in the various taxing jurisdictions, and the amount of deferred taxes that are ultimately realizable. If future taxable income is lower than expected or if tax planning strategies are not available as anticipated, we may record additional valuation allowances through income tax expense in the period such determination is made. Likewise, if we determine that we are able to realize our deferred tax assets in the future in excess of net recorded amounts, an adjustment to the deferred tax asset will benefit income tax expense in the period such determination is made.
As of December 31, 2015 and 2014, we had total deferred tax assets of $3.3 billion and $3.2 billion, respectively, net of valuation allowances of $286 million and $308 million, respectively. Our income tax benefit or expense has fluctuated considerably over the last five years from a tax benefit of $436 million in 2011 to the current year tax expense of $209 million and has been influenced primarily by U.S. energy tax credits, audit settlements and adjustments, tax planning strategies, enacted legislation, and dispersion of global income. Future changes in the effective tax rate will be subject to several factors including, remaining BEFIEX credits, business profitability, tax planning strategies, and enacted tax laws.
In addition, we operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. For additional information about income taxes, see Notes 1, 7 and 12 of the Notes to the Consolidated Financial Statements.
BEFIEX Credits
In previous years, our Brazilian operations earned tax credits under the Brazilian government’s export incentive program (BEFIEX). These credits reduced Brazilian federal excise taxes on domestic sales, resulting in an increase in the operations’ recorded net sales. As of December 31, 2015, all BEFIEX credits that were available to be monetized had been monetized. For additional information regarding BEFIEX credits, see Note 7 of the Notes to the Consolidated Financial Statements.
Legacy Product Corrective Action Reserves
In the normal course of business, we engage in investigations of potential quality and safety issues. As part of our ongoing effort to deliver quality products to consumers, we are currently investigating a limited number of potential quality and safety issues globally. As necessary, we undertake to effect repair or replacement of appliances in the event that an investigation leads to the conclusion that such action is warranted.


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As part of that process, in 2015, Whirlpool engaged in thorough investigations of incident reports associated with two of its dryer production platforms developed by Indesit. These dryer production platforms were developed by Indesit prior to Whirlpool's acquisition of Indesit in October 2014. This led to Indesit reporting the issue to regulatory authorities for consideration. These discussions determined that corrective action of the affected dryers was required. Whirlpool has implemented modifications at the point of manufacture to ensure that dryers produced after October 2015 are not affected by this issue. An outreach and service campaign is underway to modify dryers that have already been sold. Such dryers were manufactured between April 2004 and October 2015 and sold in the UK and other countries in the EMEA region under the Hotpoint (Whirlpool ownership of the Hotpoint brand in EMEA and Asia Pacific regions is not affiliated with the Hotpoint brand sold in the Americas) and Indesit brand names, as well as various other brands owned by other manufacturers, distributors and retailers whose products Indesit produced. 
In September 2015, we recorded a liability related to the corrective action. We estimate the most probable pre-tax and after tax cost of the corrective action to be €245 million and €196 million respectively (approximately $274 million and $219 million respectively, as of September 30, 2015) based on certain tax deductibility assumptions.
Approximately 90% of the affected units were manufactured by Indesit prior to its acquisition by the Company in October 2014. Accordingly, we increased the warranty liability as a purchase accounting adjustment in the opening balance sheet with a corresponding increase to goodwill of €210 million (approximately $235 million as of September 30, 2015). During 2015, we recognized expenses of $39 million related to legacy product corrective action on the heritage Indesit product in Europe. The establishment of this liability is based on several assumptions such as customer response rate, consumer options, field repair costs, inventory repair costs, and timing of tax deductibility. Our experience with respect to these factors may cause our actual costs to differ significantly from our estimated costs. In addition, we intend to seek indemnity under the terms of the Indesit acquisition agreements. Any amounts we recover from the seller would reduce our net costs.
We expect the corrective action affecting these dryers to have future cash expenditures in 2016 of approximately $155 million with the remaining cash expenditures occurring in 2017.
For additional information about the Indesit corrective action, see Note 7 of the Notes to the Consolidated Financial Statements.
Warranty Obligations
The estimation of warranty obligations is determined in the same period that revenue from the sale of the related products is recognized. The warranty obligation is based on historical experience and represents our best estimate of expected costs at the time products are sold. Warranty accruals are adjusted for known or anticipated warranty claims as new information becomes available. New product launches require a greater use of judgment in developing estimates until historical experience becomes available. Future events and circumstances could materially change our estimates and require adjustments to the warranty obligations. For additional information about warranty obligations, see Note 7 of the Notes to the Consolidated Financial Statements.
Goodwill and Intangibles
Certain business acquisitions have resulted in the recording of goodwill and trademark assets. Upon acquisition, the purchase price is first allocated to identifiable assets and liabilities, including trademark assets, based on estimated fair value, with any remaining purchase price recorded as goodwill. Most trademarks and goodwill are considered indefinite-life intangible assets and as such, are not amortized. At December 31, 2015, we had goodwill of approximately $3.0 billion. There have been no changes to our reporting units or allocations of goodwill by reporting units except for goodwill resulting from the acquisitions and changes in purchase price allocations, or the impact of foreign currency. We have trademark assets in our North America, EMEA and Asia operating segments with a total carrying value of approximately $2.7 billion as of December 31, 2015.
We perform our annual impairment assessment for goodwill and other indefinite-life intangible assets as of October 1st and more frequently if indicators of impairment exist.
In 2015, the Company elected to perform a quantitative analysis using a discounted cash flow model and other valuation techniques, to evaluate goodwill and other indefinite-life intangible assets.
Many of the factors used in assessing fair values are outside the control of management and it is reasonably likely that assumptions and estimates can change in future periods. These changes can result in future impairments.
Goodwill Valuations
In performing a quantitative assessment, we estimate fair value using the best information available to us, including market information and discounted cash flow projections also referred to as the income approach. The income approach uses operating


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segments projection of estimated operating results and cash flows that are discounted using a weighted-average cost of capital that is determined based on current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs and number of units, estimates of future expected changes in operating margins and cash expenditures. Other estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. The estimated fair value of each operating segment is compared to their respective carrying values.
Sensitivity analyses were performed around these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values. Additionally we validate our estimates of fair value under the income approach by comparing the values to fair value estimates using a market approach. A market approach estimates fair value by applying cash flow multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting units. We consider the implied control premium and conclude whether the implied control premium is reasonable based on other recent market transactions.
If actual results are not consistent with managements’ estimate and assumptions, goodwill may be overstated and a charge against net income would be required, which would adversely affect the Company’s financial statements.
Based on the results of our quantitative assessment conducted on October 1, 2015, the fair values of Whirlpool's operating segments continue to exceed their respective carrying values. The range by which the excess fair value of our operating segments' goodwill exceeded their respective carrying values was 12% to 108%.
Intangible Valuations
When performing a quantitative assessment, we estimate the fair value of these intangible assets using the relief-from-royalty method, which requires assumptions related to projected revenues from our annual long-range plan; assumed royalty rates that could be payable if we did not own the trademark; and a discount rate based on our weighted average cost of capital. If the estimated fair value of the indefinite-lived intangible asset is less than its carrying value, we would recognize an impairment loss.
Two trademarks acquired in fourth quarter of 2014 have fair values that exceed their carrying values by less than 10%. The fair values of all other trademarks exceeded their carrying values by more than 10% with the exception of one North American trademark. The fair value of this North American trademark exceeded its carrying value of approximately $1 billion by 5% in 2014 and 2015. We expect revenue trends for this brand to improve as we continue to execute specific brand investments and product development plans. Our assessment indicates no impairment as of December 31, 2015.
We performed a sensitivity analysis on our estimated fair value noting that a 10% reduction of forecasted revenues, a 50 basis point reduction in royalty rate, or a 50 basis point increase in discount rate would result in an impairment of approximately $51 million, $80 million or $22 million respectively.
If actual results are not consistent with managements’ estimate and assumptions, indefinite-life intangible assets may be overstated and a charge against net income would be required, which would adversely affect the Company’s financial statements.
Based on the results of our quantitative assessment performed as of October 1, 2014, impairment of two trademarks was determined to exist, primarily driven by a change in our brand strategy in EMEA as a result of the acquisition of Indesit and resulted in a charge of approximately $12 million in 2014.
For additional information about goodwill and intangible valuations, see Note 3 of the Notes to the Consolidated Financial Statements.
ISSUED BUT NOT YET EFFECTIVE ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The FASB has approved a one year deferral of this standard, and this pronouncement is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied using one of two retrospective application methods, with early application permitted for annual reporting periods beginning after December 15, 2016. While we have not completed our impact analysis, we do not expect the adoption to have a material impact on our Consolidated Financial Statements, and do not plan to elect early adoption of the standard.


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In April 2015, FASB issued ASU No. 2015-03, Interest - "Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". The guidance requires debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation for debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. In August 2015, the FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcements at the June 2015 EITF Meeting. ASU 2015-15 amends Subtopic 835-30 to include that the SEC would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of debt issuance costs over the term of the line-of-credit arrangement, whether or not there are any outstanding borrowings on the line-of-credit arrangement. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015, and must be applied on a retrospective basis with early adoption permitted. The adoption is not expected to have a material impact on our Consolidated Financial Statements.

In July 2015, the FASB issued ASU No. 2015-12, "Plan Accounting-Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962) Health and Welfare Benefit Plans (Topic 965)". There are three parts to the ASU that aim to simplify the accounting and presentation of plan accounting. Part I of this ASU requires fully benefit-responsive investment contracts to be measured at contract value instead of the current fair value measurement. Part II of this ASU requires investments (both participant-directed and nonparticipant-directed investments) of employee benefit plans be grouped only by general type, eliminating the need to disaggregate the investments in multiple ways. Part III of this ASU provides a similar measurement date practical expedient for employee benefit plans as available in ASU No. 2015-04, which allows employers to measure defined benefit plan assets on a month-end date that is nearest to the year’s fiscal year-end when the fiscal period does not coincide with a month-end. Parts I and II of the new guidance should be applied on a retrospective basis. Part III of the new guidance should be applied on a prospective basis. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The adoption is not expected to have a material impact on our Consolidated Financial Statements.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory", which amends ASC 330, Inventory. This ASU simplifies the subsequent measurement of inventory by using only the lower of cost and net realizable value. The ASU does not apply to inventory measured using last-in, first-out method. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2016, and must be applied on a retrospective basis with early adoption permitted. The adoption is not expected to have a material impact on our Consolidated Financial Statements.

In November 2015, FASB issued ASU No. 2015-17, "Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes", which supersedes the guidance in Topic 740, Income Taxes, that requires an entity to separate deferred tax liabilities and assets into a current amount and noncurrent amount in a classified statement of financial position. The amendment requires entities that present a classified balance sheet to classify all deferred tax liabilities and assets as a noncurrent amount. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2016, and may be early adopted on a prospective basis or on a retrospective basis to all periods presented. We have not yet determined the potential effects from this pronouncement on our Consolidated Financial Statements.
All other issued but not yet effective accounting pronouncements are not expected to have a material effect on our Consolidated Financial Statements.
OTHER MATTERS
Embraco Antitrust Matters
Beginning in February 2009, our compressor business headquartered in Brazil ("Embraco") was notified of antitrust investigations of the global compressor industry by government authorities in various jurisdictions. Embraco has resolved government investigations in various jurisdictions as well as all related civil lawsuits in the United States. Embraco has also resolved certain other claims and certain claims remain pending. Additional lawsuits could be filed.
At December 31, 2015, $10 million remains accrued, with installment payments of $8 million, plus interest, due at various times through 2016. We continue to defend these actions and take other steps to minimize our potential exposure. The final outcome and impact of these matters, and any related claims and investigations that may be brought in the future are subject to many variables, and cannot be predicted. We establish accruals only for those matters where we determine that a loss is probable and the amount of loss can be reasonably estimated. While it is currently not possible to reasonably estimate the aggregate amount of costs which we may incur in connection with these matters, such costs could have a material adverse effect on our financial position, liquidity, or results of operations in any particular reporting period.


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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BEFIEX Credits and Other Brazil Tax Matters
In previous years, our Brazilian operations earned tax credits under the Brazilian government’s export incentive program (BEFIEX). These credits reduced Brazilian federal excise taxes on domestic sales, resulting in an increase in the operations’ recorded net sales, as the credits were monetized. We did not monetize any BEFIEX credits during the year ended December 31, 2015. We monetized $14 million and $109 million of BEFIEX credits during the years ended December 31, 2014 and 2013. We began recognizing BEFIEX credits in accordance with prior favorable court decisions allowing for the credits to be recognized. We recognized export credits as they were monetized.
In December 2013, the Brazilian government reinstituted the monetary adjustment index applicable to BEFIEX credits that existed prior to July 2009, when the Brazilian government required companies to apply a different monetary adjustment index to BEFIEX credits. As of December 31, 2015, no BEFIEX credits deemed to be available prior to this action remained to be monetized. Whether use of the reinstituted index should be given retroactive effect for the July 2009 to December 2013 period has been subject to review by the Brazilian courts. If the reinstituted index is given retroactive effect, we would be entitled to recognize additional credits. We are awaiting the resolution of additional proceedings on the retroactive effect of the reinstituted index.
Our Brazilian operations have received governmental assessments related to claims for income and social contribution taxes associated with BEFIEX credits monetized from 2000 through 2002 and 2007 through 2011. We do not believe BEFIEX export credits are subject to income or social contribution taxes. We are disputing these tax matters in various courts and intend to vigorously defend our positions. We have not provided for income or social contribution taxes on these export credits, and based on the opinions of tax and legal advisors, we have not accrued any amount related to these assessments as of December 31, 2015. The total amount of outstanding tax assessments received for income and social contribution taxes relating to the BEFIEX credits, including interest and penalties, is approximately 1.5 billion Brazilian reais (approximately $395 million as of December 31, 2015).
Relying on existing Brazilian legal precedent, in 2003 and 2004, we recognized tax credits in an aggregate amount of $26 million, adjusted for currency, on the purchase of raw materials used in production (“IPI tax credits”). The Brazilian tax authority subsequently challenged the recording of IPI tax credits. No credits have been recognized since 2004. In 2009, we entered into a Brazilian government program which provided extended payment terms and reduced penalties and interest to encourage tax payers to resolve this and certain other disputed tax credit amounts. As permitted by the program, we elected to settle certain debts through the use of other existing tax credits and recorded charges of approximately $34 million in 2009 associated with these matters. In July 2012, the Brazilian revenue authority notified us that a portion of our proposed settlement was rejected and we received tax assessments of 219 million Brazilian reais (approximately $56 million as of December 31, 2015), reflecting interest and penalties to date. We are disputing these assessments and we intend to vigorously defend our position. Based on the opinion of our tax and legal advisors, we have not recorded an additional reserve related to these matters.
In 2001, Brazil adopted a law making the profits of controlled foreign corporations of Brazilian entities subject to income and social contribution tax regardless of whether the profits were repatriated ("CFC Tax"). Our Brazilian subsidiary, along with other corporations, challenged tax assessments on foreign profits on constitutionality and other grounds. In April 2013, the Brazilian Supreme Court ruled on one of our cases, finding that the law is constitutional, but remanding the case to a lower court for consideration of other arguments raised in our appeal, including the existence of tax treaties with jurisdictions in which controlled foreign corporations are domiciled. As of December 31, 2015, our potential exposure for income and social contribution taxes relating to profits of controlled foreign corporations, including interest and penalties and net of expected foreign tax credits, is approximately 161 million Brazilian reais (approximately $41 million as of December 31, 2015). We believe these assessments are without merit and we intend to continue to vigorously dispute them. Based on the opinion of our tax and legal advisors, we have not accrued any amount related to these assessments as of December 31, 2015.
In December 2013, we entered into a Brazilian government program to settle long standing disputes. Participation in the program removed uncertainty related to 16 assessments that were previously under dispute and significantly reduces potential penalties and interest associated with these matters. Our participation will result in total payments including principal, interest, and penalties of 75 million Brazilian reais, to be paid in 30 monthly installments, which began in December 2013. There was a nominal amount of outstanding principal, interest, and penalties at December 31, 2015, the payments for which we will complete during 2016.


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In addition to the IPI tax credit and CFC Tax matters noted above, we are currently disputing other assessments issued by the Brazilian tax authorities related to non-income and income tax matters, including for the monetization of BEFIEX credits and other matters, which are at various stages of review in numerous administrative and judicial proceedings. Sessions of trial of the Brazilian administrative council of tax appeals, or CARF, have resumed after having been suspended for several months while changes in CARF procedures and staffing were implemented. The amounts related to these assessments will continue to be increased by monetary adjustments at the Selic rate, which is the benchmark rate set by the Brazilian Central Bank. In accordance with our accounting policies, we routinely assess these matters and, when necessary, record our best estimate of a loss. We believe these tax assessments are without merit and are vigorously defending our positions.
Litigation is inherently unpredictable and the conclusion of these matters may take many years to ultimately resolve. Accordingly, it is possible that an unfavorable outcome in these proceedings could have a material adverse effect on our financial position, liquidity, or results of operations in any particular reporting period.
Other Litigation
We have vigorously defended against numerous lawsuits pending in the United States relating to certain of our front load washing machines. We have reached preliminary agreement on a settlement that will resolve all such class action lawsuits. The settlement has been accounted for in interest and sundry income (expense) in the fourth quarter of 2015. The settlement requires court approval in order to be finalized, and we are proceeding through the court process to request such approval.
In addition, we are currently vigorously defending a number of other lawsuits in federal and state courts in the United States related to the manufacturing and sale of our products which include class action allegations, and may become involved in similar actions in other jurisdictions. These lawsuits allege claims which include negligence, breach of contract, breach of warranty, product liability and safety claims, fraud, and violation of federal and state regulations, including consumer protection acts. We do not have insurance coverage for class action lawsuits. We are also involved in various other legal actions in the United States and other jurisdictions around the world arising in the normal course of business, for which insurance coverage may or may not be available depending on the nature of the action. We dispute the merits of these suits and actions, and intend to vigorously defend them. Management believes, based upon its current knowledge, after taking into consideration legal counsel's evaluation of such suits and actions, and after taking into account current litigation accruals, that the outcome of these matters currently pending against Whirlpool should not have a material adverse effect, if any, on our financial position, liquidity, or results of operations.
Other Matters
In 2013, the French Competition Authority commenced an investigation of appliance manufacturers and retailers in France. The investigation includes 11 manufacturers, including the Whirlpool and Indesit operations in France. Although it is currently not possible to assess the impact, if any, this matter may have on our Consolidated Financial Statements, the resolution of this matter could have a material adverse effect on our financial position, liquidity, or results of operations in any particular reporting period.
Antidumping Petition

On December 16, 2015, we submitted a petition requesting that the U.S. Department of Commerce and the United States International Trade Commission initiate antidumping investigations regarding large residential washers from China sold by Samsung and LG into the United States. The purpose of this petition, similar to the petitions we filed in December 2011 regarding large residential washers from South Korea and Mexico, is to establish conditions of fair competition in the United States that will support significant investment and innovation in the production of large residential washers in the United States and the U.S. jobs created by that production. This petition is the result of our continual monitoring of the large residential washer landscape, which highlighted that Samsung and LG have continued to dump washers into the United States following the conclusion of our earlier case in 2013. The Whirlpool washers affected by the imports subject in this case are made in Clyde, Ohio.

There are several steps in the process of the antidumping investigation.  We expect a preliminary determination of the amount of dumping in July 2016.  The preliminary determination will be followed by several other steps leading to a final decision from the U.S. Department of Commerce and the U.S. International Trade Commission, which we expect in January 2017.





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RESULTS OF OPERATIONS - (CONTINUED)

FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Certain statements contained in this annual report, including those within the forward-looking perspective section within this Management's Discussion and Analysis, and other written and oral statements made from time to time by us or on our behalf do not relate strictly to historical or current facts and may contain forward-looking statements that reflect our current views with respect to future events and financial performance. As such, they are considered “forward-looking statements” which provide current expectations or forecasts of future events. Such statements can be identified by the use of terminology such as “may,” “could,” “will,” “should,” “possible,” “plan,” “predict,” “forecast,” “potential,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “may impact,” “on track,” and similar words or expressions. Our forward-looking statements generally relate to our growth strategies, financial results, product development, and sales efforts. These forward-looking statements should be considered with the understanding that such statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.
This document contains forward-looking statements about Whirlpool Corporation and its consolidated subsidiaries (“Whirlpool”) that speak only as of this date. Whirlpool disclaims any obligation to update these statements. Forward-looking statements in this document may include, but are not limited to, statements regarding expected earnings per share, cash flow, productivity and raw material prices. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool's forward-looking statements. Among these factors are: (1) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers; (2) acquisition and investment-related risk, including risk associated with our acquisitions of Hefei Sanyo and Indesit, and risk associated with our increased presence in emerging markets; (3) Whirlpool's ability to continue its relationship with significant trade customers and the ability of these trade customers to maintain or increase market share; (4) risks related to our international operations, including changes in foreign regulations, regulatory compliance and disruptions arising from natural disasters or terrorist attacks; (5) fluctuations in the cost of key materials (including steel, plastic, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (6) the ability of Whirlpool to manage foreign currency fluctuations; (7) litigation, tax, and legal compliance risk and costs, especially costs which may be materially different from the amount we expect to incur or have accrued for; (8) the effects and costs of governmental investigations or related actions by third parties; (9) changes in the legal and regulatory environment including environmental and health and safety regulations; (10) Whirlpool's ability to maintain its reputation and brand image; (11) the ability of Whirlpool to achieve its business plans, productivity improvements, cost control, price increases, leveraging of its global operating platform, and acceleration of the rate of innovation; (12) information technology system failures and data security breaches; (13) product liability and product recall costs; (14) inventory and other asset risk; (15) the uncertain global economy and changes in economic conditions which affect demand for our products; (16) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (17) our ability to attract, develop and retain executives and other qualified employees; (18) the impact of labor relations; (19) Whirlpool's ability to obtain and protect intellectual property rights; and (20) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and postretirement benefit plans.
We undertake no obligation to update any forward-looking statement, and investors are advised to review disclosures in our filings with the SEC. It is not possible to foresee or identify all factors that could cause actual results to differ from expected or historic results. Therefore, investors should not consider the foregoing factors to be an exhaustive statement of all risks, uncertainties, or factors that could potentially cause actual results to differ from forward-looking statements.
Additional information concerning these and other factors can be found in “Risk Factors” in Item 1A of this report.


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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
We have in place an enterprise risk management process that involves systematic risk identification and mitigation covering the categories of enterprise, strategic, financial, operation and compliance and reporting risk. The enterprise risk management process receives Board of Directors and Management oversight, drives risk mitigation decision-making and is fully integrated into our internal audit planning and execution cycle.
We are exposed to market risk from changes in foreign currency exchange rates, domestic and foreign interest rates, and commodity prices, which can affect our operating results and overall financial condition. We manage exposure to these risks through our operating and financing activities and, when deemed appropriate, through the use of derivatives. Derivatives are viewed as risk management tools and are not used for speculation or for trading purposes. Derivatives are generally contracted with a diversified group of investment grade counterparties to reduce exposure to nonperformance on such instruments.
We use foreign currency forward contracts, currency options and currency swaps to hedge the price risk associated with firmly committed and forecasted cross-border payments and receipts related to ongoing business and operational financing activities. Foreign currency contracts are sensitive to changes in foreign currency exchange rates. At December 31, 2015, a 10% favorable or unfavorable exchange rate movement in each currency in our portfolio of foreign currency contracts would have resulted in an incremental unrealized gain of approximately $65 million or loss of approximately $80 million. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the re-measurement of the underlying exposures.
We enter into commodity swap contracts to hedge the price risk associated with firmly committed and forecasted commodities purchases, the prices of which are not fixed directly through supply contracts. As of December 31, 2015, a 10% favorable or unfavorable shift in commodity prices would have resulted in an incremental gain or loss of approximately $35 million, respectively, related to these contracts.



34


ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WHIRLPOOL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
(Millions of dollars, except per share data)
 

 
 
2015
 
2014
 
2013
Net sales
 
$
20,891

 
$
19,872

 
$
18,769

Expenses
 
 
 
 
 
 
Cost of products sold
 
17,201

 
16,477

 
15,471

Gross margin
 
3,690

 
3,395

 
3,298

Selling, general and administrative
 
2,130

 
2,038

 
1,828

Intangible amortization
 
74

 
33

 
25

Restructuring costs
 
201

 
136

 
196

Operating profit
 
1,285

 
1,188

 
1,249

Other income (expense)
 
 
 
 
 
 
Interest and sundry income (expense)
 
(89
)
 
(142
)
 
(155
)
Interest expense
 
(165
)
 
(165
)
 
(177
)
Earnings before income taxes
 
1,031

 
881

 
917

Income tax expense
 
209

 
189

 
68

Net earnings
 
822

 
692

 
849

Less: Net earnings available to noncontrolling interests
 
39

 
42

 
22

Net earnings available to Whirlpool
 
$
783

 
$
650

 
$
827

Per share of common stock
 
 
 
 
 
 
Basic net earnings available to Whirlpool
 
$
9.95

 
$
8.30

 
$
10.42

Diluted net earnings available to Whirlpool
 
$
9.83

 
$
8.17

 
$
10.24

Weighted-average shares outstanding (in millions)
 
 
 
 
 
 
Basic
 
78.7

 
78.3

 
79.3

Diluted
 
79.7

 
79.6

 
80.8


The accompanying notes are an integral part of these Consolidated Financial Statements.


35



WHIRLPOOL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
(Millions of dollars)

 
 
2015
 
2014
 
2013
Net earnings
 
$
822

 
$
692

 
$
849

 
 
 
 
 
 
 
Other comprehensive income (loss), before tax:
 
 
 
 
 
 
  Foreign currency translation adjustments
 
(432
)
 
(392
)
 
(122
)
  Derivative instruments:
 

 

 

     Net gain (loss) arising during period
 
(25
)
 
10

 
(9
)
     Less: reclassification adjustment for gain (loss) included in net earnings
 
(2
)
 
11

 
(11
)
  Derivative instruments, net
 
(23
)
 
(1
)
 
2

  Marketable securities:
 
 
 
 
 
 
     Net gain arising during period
 
3

 

 
7

  Marketable securities, net
 
3

 

 
7

  Defined benefit pension and postretirement plans:
 
 
 
 
 
 
     Prior service (cost) credit arising during period
 
(5
)
 
(11
)
 
(2
)
     Net gain (loss) arising during period
 
(55
)
 
(242
)
 
475

     Less: amortization of prior service credit (cost) and actuarial (loss)
 
19

 
(20
)
 
(35
)
  Defined benefit pension and postretirement plans, net:
 
(79
)
 
(233
)
 
508

Other comprehensive income (loss), before tax
 
(531
)
 
(626
)
 
395

    Income tax benefit (expense) related to items of other comprehensive income (loss)
 
30

 
80

 
(165
)
Other comprehensive income (loss), net of tax
 
$
(501
)
 
$
(546
)
 
$
230

 
 
 
 
 
 
 
Comprehensive income
 
$
321

 
$
146

 
$
1,079

     Less: comprehensive income, available to noncontrolling interests
 
30

 
38

 
19

Comprehensive income available to Whirlpool
 
$
291

 
$
108

 
$
1,060


The accompanying notes are an integral part of these Consolidated Financial Statements.


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WHIRLPOOL CORPORATION
CONSOLIDATED BALANCE SHEETS
At December 31,
(Millions of dollars)
 
 
2015
 
2014
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
772

 
$
1,026

Accounts receivable, net of allowance of $160 and $154, respectively
2,530

 
2,768

Inventories
2,619

 
2,740

Deferred income taxes
451

 
417

Prepaid and other current assets
953

 
1,147

Total current assets
7,325

 
8,098

Property, net of accumulated depreciation of $5,953 and $5,959, respectively
3,774

 
3,981

Goodwill
3,006

 
2,807

Other intangibles, net of accumulated amortization of $327 and $267, respectively
2,678

 
2,803

Deferred income taxes
1,850

 
1,900

Other noncurrent assets
377

 
413

Total assets
$
19,010

 
$
20,002

Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
4,403

 
$
4,730

Accrued expenses
675

 
852

Accrued advertising and promotions
706

 
673

Employee compensation
452

 
499

Notes payable
20

 
569

Current maturities of long-term debt
508

 
234

Other current liabilities
980

 
846

Total current liabilities
7,744

 
8,403

Noncurrent liabilities
 
 
 
Long-term debt
3,470

 
3,544

Pension benefits
1,025

 
1,123

Postretirement benefits
390

 
446

Other noncurrent liabilities
707

 
690

Total noncurrent liabilities
5,592

 
5,803

Stockholders’ equity
 
 
 
Common stock, $1 par value, 250 million shares authorized, 111 million and 110 million shares issued, and 77 million and 78 million shares outstanding, respectively
111

 
110

Additional paid-in capital
2,641

 
2,555

Retained earnings
6,722

 
6,209

Accumulated other comprehensive loss
(2,332
)
 
(1,840
)
Treasury stock, 33 million and 32 million shares, respectively
(2,399
)
 
(2,149
)
Total Whirlpool stockholders’ equity
4,743

 
4,885

Noncontrolling interests
931

 
911

Total stockholders’ equity
5,674

 
5,796

Total liabilities and stockholders’ equity
$
19,010

 
$
20,002


The accompanying notes are an integral part of these Consolidated Financial Statements.


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WHIRLPOOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
(Millions of dollars)
 
2015
 
2014
 
2013
Operating activities
 
 
 
 
 
Net earnings
$
822

 
$
692

 
$
849

Adjustments to reconcile net earnings to cash provided by (used in) operating activities:

 

 

Depreciation and amortization
668

 
560

 
540

Curtailment gain
(63
)
 

 

Changes in assets and liabilities (net of effects of acquisitions):

 

 

Accounts receivable
(89
)
 
(90
)
 
(65
)
Inventories
(141
)
 
49

 
(112
)
Accounts payable
14

 
359

 
275

Accrued advertising and promotions
74

 
121

 
28

Accrued expenses and current liabilities
(43
)
 
(232
)
 
82

Taxes deferred and payable, net
(42
)
 
49

 
(105
)
Accrued pension and postretirement benefits
(129
)
 
(181
)
 
(184
)
Employee compensation
8

 
(17
)
 
(23
)
Other
146

 
169

 
(23
)
Cash provided by operating activities
1,225

 
1,479

 
1,262

Investing activities
 
 
 
 
 
Capital expenditures
(689
)
 
(720
)
 
(578
)
Proceeds from sale of assets and business
37

 
21

 
6

Change in restricted cash
47

 
74

 

Acquisition of Indesit Company S.p.A.

 
(1,356
)
 

Acquisition of Hefei Rongshida Sanyo Electric Co., Ltd.

 
(453
)