Whirlpool 2007 Annual Report Download - page 110

FINANCIAL SUMMARY P.108
EXECUTIVE OVERVIEW
Whirlpool Corporation (“Whirlpool”) is the world’s leading manufacturer of major home appliances
with revenues of $19.4billion and net earnings of $640 million for the year ended December 31, 2007.
We are a leading producer of major home appliances in North America and Latin America and have
a significant presence in markets throughout Europe and India. We have received worldwide recog-
nition 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 (60% of revenue), Europe (20% of revenue), Latin
America (18% of revenue), and Asia (2% of revenue).
Our global branded consumer products strategy over the past several years has been to introduce
innovative new products, increase brand customer loyalty, expand our presence in foreign markets,
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.
We monitor country-specific economic factors such as gross domestic product, 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.
Competition in the home appliance industry is intense in all global markets we serve. In addition
to our traditional competitors such as Electrolux, GE, and Kenmore in North America, there has
been an emergence of strong global competitors such as LG, Bosch Siemens, Samsung, and Haier. In
each geographic region, our customer base is consolidated and characterized by large, sophisticated
trade customers who have many choices and demand for competitive products, services and prices.
We believe that our acquisition of Maytag Corporation (“Maytag”) on March 31, 2006, coupled with
productivity and cost controls, new innovative product introductions, and improved product mix
will enhance our ability to respond to these competitive conditions. We believe this combination will
translate into benefits for our trade customers and consumers by generating significant cost savings
that enable us to continue to offer competitive prices across a wide array of innovative, high-quality
consumer products that translate into increased sales and enhanced financial results.
During 2007, we delivered record sales and earnings per share in a challenging global market. The
U.S. appliance industry experienced the largest year-over-year volume decline in over two decades
and material- and oil-related costs increased $600 million from the prior year. During the last three
and a half years we have seen unprecedented material cost inflation which has increased our input
cost over the same time frame by $1.7billion. We accomplished a major milestone in 2007 by complet-
ing the Maytag integration and achieved our initial acquisition cost efficiency goals one year ahead of
plan. We also improved our cost productivity performance across the organization. Our international
business reported record results with significant improvements over 2006 while North America
results were lower primarily due to a weak U.S. industry appliance demand and significantly higher
material costs.
FACTORS AFFECTING COMPARABILITY
On March 31, 2006, we completed the acquisition of Maytag. Maytag’s reported consolidated net sales
for the year ended December 31, 2005 were approximately $4.9billion. With the acquisition, we added
an array of home appliance brands including Maytag, Jenn-Air and Amana. The aggregate purchase
price for Maytag was approximately $1.9billion, including approximately $848 million of cash and
approximately 9.7million shares of common stock. The results of Maytag’s operations have been
included in our Consolidated Financial Statements as of April 1, 2006.
During the first quarter of 2007, we adopted changes to our segment reporting consistent with the
methodology our chief operating decision maker now uses to evaluate each segment’s operating and
financial results. We previously included the financial results for our Caribbean and certain Latin
America operations and exports of certain portable appliances to Europe within our North America
business segment. The results for these businesses are now being reported within the Latin America
and Europe segments, respectively. All prior periods presented have been reclassified to reflect
current year presentation.