Whirlpool 2008 Annual Report Download - page 88

 
In 2008, consolidated selling, general and administrative expenses,
as a percent of consolidated net sales, increased as compared to 2007 primarily due to lower sales
volume and higher brand investment, partially offset by lower infrastructure costs and $20 million in gains
associated with asset sales. Additionally, this increase was impacted by a $12 million operating tax credit
recorded by our Latin America region during the third quarter of 2007. In 2007, consolidated selling, general
and administrative expenses, as a percent of consolidated net sales, decreased as compared to 2006,
primarily due to higher sales volume, acquisition efficiencies and administrative cost reductions.
Restructuring initiatives resulted in charges of $149 million, $61 million and $55 million in
2008, 2007, and 2006, respectively, reflecting ongoing efforts to optimize our global operating platform.
These charges are included in restructuring in our Consolidated Statements of Income and primarily
consist of charges to restructure the cooking platform in Latin America, shift refrigeration and dishwasher
capacity to lower cost regions in Europe and North America, restructure the laundry platform in North
America and Europe and reorganize the salaried workforce throughout Europe and North America.
On October 27, 2008, management committed to a workforce reduction plan whereby we will reduce our
employee base worldwide between the fourth quarter of 2008 and the beginning of 2010.
Interest and sundry expense for 2008 increased by $37 million
from expense of $63 million in 2007 to expense of $100 million in 2008. Higher expense in 2008 was primarily
due to the impact of foreign currency and an impairment charge of $9 million in our Europe segment
associated with an available for sale investment, partially offset by higher interest income. Interest and
sundry expense for 2007 increased by $61 million from expense of $2 million to expense of $63 million
compared to 2006. The results in 2006 include a $31 million gain on the sale of an investment while 2007
expense includes a $17 million increase in legal reserves as well as higher non-income based taxes.
Interest expense in 2008 was consistent as compared to 2007 as higher debt levels
were offset by lower interest rates. Interest expense in 2007 increased $1 million as compared to 2006.
For nine months in 2006, we incurred higher debt levels associated with debt assumed and issued for
the Maytag acquisition which was offset by lower debt levels at lower interest rates during 2007.
During 2007, we sold approximately 9 million shares, or 7%, of Whirlpool
of India Limited and recorded a gain of approximately $7 million. This sale was executed to satisfy a
change in the Stock Exchange Board of India listing standards and regulations. Following the sale of
stock, our ownership interest in Whirlpool of India Limited is 75%.
The effective income tax rate was a benefit of 81.7% in 2008, and tax expense of 14.5%
and 20.4% in 2007 and 2006, respectively. The rates and changes in rates are primarily due to a decline
in profitability and energy tax credits generated in the U.S. in 2008 as well as a combination of certain
discrete items recognized during the year, dispersion of global income, tax credit availability, and tax
planning activities. At the end of each interim period, we make our best estimate of the effective tax
rate expected to be applicable for the full fiscal year and the impact of discrete items, if any, and adjust
the quarterly rate, as necessary. The decrease in the effective tax rate for the year ended December 31, 2008
resulted in an increase in earnings per diluted share of $3.11 as compared to the prior year.
Earnings from continuing operations were $418 million in 2008
versus $647 million and $486 million in 2007 and 2006, respectively, due to the factors described above.
We classified the Hoover floor-care, Dixie-Narco vending systems, and Jade
commercial and residential businesses as discontinued operations during 2006. The decision to divest
these businesses allowed us to focus on our core appliance business.
Net earnings were $418 million in 2008 versus $640 million and $433 million in 2007
and 2006, respectively, due to the factors described above. Earnings were impacted by $7 million and
$53 million in losses from discontinued operations for 2007 and 2006, respectively.