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Whirlpool Cleans Up

The washing machine titan beats estimates and boosts guidance.
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Whirlpool (WHR) posted a strong fourth-quarter profit, raised guidance and said its merger with Maytag (MYG) could close as early as the first quarter, depending on the regulatory reaction.

The Benton Harbor, Mich., appliance giant made $126 million, or $1.83 a share, for the quarter ended Dec. 31, up from the year-ago $97 million, or $1.44 a share. Revenue rose 9% from a year ago, or 6% excluding currency translation, to $3.95 billion. Analysts surveyed by Thomson First Call were looking for a $1.70-a-share profit on sales of $3.83 billion.

"Overall, 2005 was a challenging operating environment where we faced all-time high levels of material and oil-related costs. Our global business responded well to this environment and enabled us to deliver a record year of results for our shareholders," said CEO Jeff M. Fettig. "These results were driven by very positive consumer demand for our new product innovations, strong sales performance, disciplined cost controls and overall outstanding execution by our people around the world."

During the fourth quarter, net earnings increased 30% and operating profit margins expanded by one point. These results were aided by productivity, cost-based price adjustments, volume growth, tax credits and a lower effective tax rate. Results were hit by higher incentive compensation, material and oil-related cost increases, higher restructuring costs and increased reserves for litigation.

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Material and oil-related costs increased by $55 million in the fourth quarter and $535 million for the year. Cash provided by operating activities for the year was $881 million and enabled the company to reduce overall debt levels from $1.4 billion to $1.2 billion during the year. Free cash flow was $412 million.

The company said it expects to make $7 to $7.25 a share for 2006, well above the $6.34 Wall Street consensus, even without taking into account any of the benefits of the planned Maytag deal. Whirlpool said it and Maytag have agreed not to close the proposed merger before Feb. 27 without the Justice Department's Antitrust Division's concurrence, although the Antitrust Division may request additional time for review. "Whirlpool and Maytag are working closely with the Department of Justice, and continue to cooperate fully with its investigation and respond promptly to its inquiries," Whirlpool said.