Whirlpool 2002 Annual Report Download - page 9

2002 Annual Report 15 Chairman’s Letter
14
TO OUR SHAREHOLDERS – Whirlpool faced many challenges
last year, and we responded appropriately and aggressively
to the changing dynamics of world economies and the
markets in which we participate. As a result, 2002 was an
important year of milestones and accomplishments that
reflect the strength of our operations and the company’s
ability to deliver consistent, ongoing improvements in
operating and revenue performance. For example:
>Net revenues exceeded $11 billion, a record for the
company.
>Excluding one-time charges, full-year core earnings
of $6.07 per diluted share marked a record level of
performance for our operations.
>Through our strategic focus of building unmatched
levels of customer loyalty for our brands globally, we
extended our brand leadership position worldwide.
>Our brands set a record for the most product innovations
ever introduced by the company in a single year,
reinforcing Whirlpool’s standing as the innovation
leader within the appliance industry. Examples of these
innovations are highlighted throughout this report.
>
We successfully integrated two strategically important
acquisitions during the year, and, in doing so, strengthened
our manufacturing and brand positions in North America
and Europe.
>We identified the activities and finalized the charges of
our most significant and important restructuring effort
in the company’s history. When fully implemented, the
restructuring will reduce ongoing structural costs by
more than $200 million a year. Changes to date have
already strengthened our global platform and improved
our manufacturing cost position.
>Improvements in global procurement, technology,
product development and manufacturing helped drive
record levels of productivity savings.
>Our operations generated $290 million of free cash
flow as company-wide efforts resulted in record low
levels of working capital.
RECORD REVENUES
Revenue growth across most regions during the year led
to record net sales of more than $11 billion and solidified
Whirlpool’s position as the world’s top major appliance
manufacturer and marketer. Contributing to the sales
improvement was the continued growth of the
Whirlpool
brand – the No. 1 selling appliance brand in the world.
Whirlpool Corporation is strongly positioned as the market
leader in the United States, Canada, Latin America, Central
Europe and India. The company also holds the No. 2 market
position in Mexico, and the No. 3 spot in Western and
Central Europe. Whirlpool also continues to build a strong
and growing presence in China.
Throughout the year, our operations leveraged Whirlpool’s
global capabilities and regional market positions to deliver
the record revenue growth and extend our brand leadership.
RESTRUCTURING
We recorded final charges for the company’s global
restructuring effort that we announced in December of 2000.
Since then, the initiative has resulted in restructuring and
related charges totaling $373 million, and the elimination
of more than 7,000 positions worldwide. Much of the
restructuring initiative focused on Whirlpool’s European
operation. The initiative has created a more cost-effective
global structure that is better aligned to support the
company’s value creation strategies. When fully implemented,
the corporate restructuring effort is expected to result in
annualized savings of more than $200 million.
NET AND OPERATING RESULTS
A number of one-time charges contributed to a net loss
of $5.68 per diluted share in 2002. The most significant
of these charges related to the company’s adoption of the
change in accounting principle pertaining to goodwill
(Statement of Financial Accounting Standards No. 142),
final costs for the company’s global restructuring initiative
and the write-off of aircraft-lease assets following the
bankruptcy of UAL Corp.
Excluding these one-time charges, our operations delivered
full-year record core operating earnings of $6.07 per diluted
share, an 11-percent improvement from comparable
earnings in 2001, which was a solid achievement that met
our growth expectations. These results were driven by the
combination of record sales, unprecedented levels of product
innovation, significant cost savings from productivity
improvements and the benefits from restructuring.
Details about the charges, their effect on 2002 net earnings,
and the reconciliation of net earnings to non-GAAP core
earnings are discussed in the Management’s Discussion
and Analysis section of this report.
REGIONAL GROWTH THROUGH ACQUISITION
Whirlpool bolstered its global position during the year
through the acquisition of two strategic businesses in
key markets. In Mexico, we completed the purchase of
Vitromatic S.A. de C.V., which had been a joint venture
between Whirlpool and Vitro S.A. since 1987. Vitromatic,
now called Whirlpool Mexico, is a leading appliance
manufacturer that gives us direct access to the fast-
growing Mexican market. The acquisition extends our
North American manufacturing base and provides
additional export opportunities to countries in the
Caribbean, Central America and northern parts of South
America, as well as to the United States. In Central
Europe, Whirlpool acquired Polar S.A., a leading appliance
manufacturer with the No. 1 brand name in Poland. The
acquisition of Polar improves our brand presence in
Central Europe and provides Whirlpool Europe with a
low-cost manufacturing source to serve the entire region.
RECORD PACE OF INNOVATION
Our brands introduced a record number of product
innovations to consumers worldwide in 2002. The
introductions contributed to our record sales results
and helped drive higher levels of customer loyalty to our
brands. Over the last three years, we have built and
embedded within our global enterprise the skills and
capabilities required to discover, develop and rapidly
bring to market true innovation. These innovations are
giving our brands a sustainable competitive advantage
in the marketplace and creating value for our customers,
trade partners and shareholders.
Chairman’s Letter
> David R. Whitwam
Chairman of the Board and Chief Executive Officer