Fitch Ratings Affirms Whirlpool's 'A-'Senior Notes; Revises Outlook to Negative.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 10, 2004

Fitch Ratings has affirmed the rating on Whirlpool Corporation's (Whirlpool) senior unsecured notes at 'A-' and the rating on Whirlpool's and Whirlpool Finance B.V.'s commercial paper programs at 'F2'. The Rating Outlook has been revised to Negative from Stable. On March 31, 2004, Whirlpool had $1.4 billion of debt and $185 million of commercial paper outstanding.

The ratings reflect Whirlpool's leading market positions throughout the world, and its global operating platform, which has benefited from the company's global restructuring efforts begun in 2000. Whirlpool is the world's largest appliance manufacturer and holds the No. 1 market position in many regions including North America, Latin America, Central Europe, and India. Whirlpool benefits from its broad product line of highly recognized brands, its successful innovation, and manufacturing and marketing expertise. In addition, Whirlpool has strong distribution partnerships, particularly in North America which accounted for 65% of revenues and 79% of operating earnings in 2003. The largest consumer appliance retailer in the U.S., Sears, is Whirlpool's largest customer accounting for 18% of 2003 sales. The ratings also consider the company's debt financed acquisition activity and sensitivity to changes in consumer spending.

The revision in Outlook to Negative from Stable considers Whirlpool's slow margin decline since 1999, an expected rise in interest rates domestically, and the company's plans to increase share repurchases. In the recent past, margins have been impacted by industry pricing pressure resulting from competition, retailers demanding additional concessions from manufacturers, and more recently, commodity price increases. The ability to strengthen margins will remain a challenge. Furthermore, over the past three years, a very low interest rate environment has benefited revenues, although EBITDA growth and margins have not kept pace. From a consumer standpoint rising interest rates in the U.S. could limit growth as financing for major purchases become more onerous. Longer term potential inroads from Asian imports could also have a negative impact on growth, and plans to increase share repurchases, although from internally generated funds, will limit balance sheet improvement over the next couple of years.

From 2001 to the latest twelve months (LTM) ending March 31, 2004, revenues increased about 21% to $12.5 billion due to acquisitions and internal growth, while operating earnings increased 7.9% to $877.5 million. Operating earnings growth has not kept pace with revenue growth due to ongoing industry pricing pressure, and more recently increasing pension and medical expense. Net free cash flow (EBITDA less cash interest, cash taxes, capital expenditures, and changes in working capital), while still strong, decreased 29% to approximately $605 million for the period as a result of increasing capital spending combined with decreasing working capital contraction. Whirlpool anticipates improved free cash flow generation in 2004 due to better working capital management, and as a result, the company recently stated that it would complete about $250 million of share repurchases in 2004, up from approximately $100 million in 2003.

Credit protection measures remain strong with leverage, as measured by total debt to EBITDA, remaining flat at 1.2 times (x) in both 2001 and LTM ending March 31, 2004 and EBITDA to interest improving to 9.7x from 7.8x for the period. Fitch expects credit protection measures to essentially remain unchanged in the near term as free cash flow generation is utilized toward increased share repurchase activity rather than debt repayment.