Whirlpool 2004 Annual Report Download - page 28

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Other Matters
While lower discount rates increased Whirlpool's pension obli-
gations during 2004, improvement in equity market perform-
ance during the year increased the value of pension fund assets.
Whirlpool also contributed approximately $49 million pre-tax
($31 million to funded plans) to its U.S. pension plans during
2004, of which $31 million was a voluntary contribution and
$18 million was required. The Company also contributed $21
million to its foreign plans during 2004. At December 31, 2004,
the Company's defined benefit pension plans still remain under-
funded on a combined basis.
The Company recognized consolidated pre-tax pension cost
(credits) of $91 million, $78 million and $(37) million in 2004,
2003 and 2002, respectively. The Company currently expects
that U.S. pension cost for 2005 will be approximately $66 mil-
lion, based on a plan amendment, an expected rate of return on
assets assumption of 8.75% and a lower discount rate of 5.80%.
The $66 million compares to pension cost of $68 million in
2004. Consolidated pension cost in 2005 is anticipated to be
approximately $91 million, relatively unchanged from 2004.
In January 2005, the Company amended the Whirlpool
Employees Pension Plan. The effect of this amendment will be
to reduce the projected benefit obligation by approximately $80
million. The accumulated benefit obligation will not be affected
by the amendment.
The Company is involved in various legal actions arising in the
normal course of business. Management, after taking into con-
sideration legal counsel's evaluation of such actions, is of the
opinion that the outcome of these matters will not have a mate-
rial adverse effect on the Company's financial position or results
of operations.
Market Risk
The Company is exposed to market risk from changes in foreign
currency exchange rates, domestic and foreign interest rates, and
commodity prices, which can affect the Company's operating
results and overall financial condition. Whirlpool manages its
exposure to these market risks through its operating and financ-
ing activities and, when deemed appropriate, through the use of
derivative financial instruments. Derivative financial instru-
ments are viewed as risk management tools and are not used for
speculation or for trading purposes. Derivative financial instru-
ments are entered into with a diversified group of investment
grade counterparties to reduce its exposure to nonperformance
on such instruments. The Company's sensitivity analysis reflects
the effects of changes in market risk but does not factor in
potential business risks of the counterparties or appropriate use
of instruments.
Whirlpool uses 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 its ongoing business and operational
financing activities. Foreign currency contracts are sensitive to
changes in foreign currency exchange rates.