UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-655
MAYTAG CORPORATION
A Delaware Corporation I.R.S. Employer Identification No. 42-0401785
403 West Fourth Street North, Newton, Iowa 50208
Registrant's telephone number: 515-792-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the issuer's classes of common
stock, as of March 31, 2000:
Common Stock, $1.25 par value - 78,385,503
Page 1 of 16
MAYTAG CORPORATION
Quarterly Report on Form 10-Q
Quarter Ended March 31, 2000
I N D E X
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income..........................3
Consolidated Balance Sheets................................4
Consolidated Statements of Cash Flows......................6
Notes to Consolidated Financial Statements.................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................10
Item 3. Quantitative and Qualitative Disclosures about Market
Risk......................................................14
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..........................15
Signatures................................................16
2
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Consolidated Statements of Income
Three Months Ended
March 31
In thousands except per share data 2000 1999
Net sales $1,095,493 $1,106,186
Cost of sales 781,545 778,849
Gross profit 313,948 327,337
Selling, general and administrative expenses 170,913 173,845
Operating income 143,035 153,492
Interest expense (15,090) (15,379)
Other - net (1,370) 565
Income before income taxes and minority
interest 126,575 138,678
Income taxes 46,200 52,004
Income before minority interest 80,375 86,674
Minority interest (4,452) 342
Net income $ 75,923 $ 87,016
Basic earnings per common share:
Net income $ 0.95 $ 0.98
Diluted earnings per common share:
Net income $ 0.89 $ 0.95
Dividends per common share $ 0.18 $ 0.18
See notes to consolidated financial statements.
3
MAYTAG CORPORATION
Consolidated Balance Sheets
March 31 December 31
In thousands except share data 2000 1999
Assets
Current assets
Cash and cash equivalents $ 20,090 $ 28,815
Accounts receivable 613,622 494,747
Inventories 425,198 404,120
Deferred income taxes 35,482 35,484
Other current assets 37,945 58,350
Total current assets 1,132,337 1,021,516
Noncurrent assets
Deferred income taxes 112,600 106,600
Prepaid pension cost 1,513 1,487
Intangible pension asset 48,668 48,668
Other intangibles 423,547 427,212
Other noncurrent assets 54,970 54,896
Total noncurrent assets 641,298 638,863
Property, plant and equipment
Property, plant and equipment 2,104,675 2,065,850
Less allowance for depreciation 1,127,844 1,089,742
Total property, plant and equipment 976,831 976,108
Total assets $ 2,750,466 $ 2,636,487
See notes to consolidated financial statements.
4
MAYTAG CORPORATION
Consolidated Balance Sheets - Continued
March 31 December 31
In thousands except share data 2000 1999
Liabilities and Shareowners' Equity
Current liabilities
Notes payable $ 182,472 $ 133,041
Accounts payable 270,751 277,780
Compensation to employees 63,216 77,655
Accrued liabilities 208,544 194,074
Income taxes payable 42,328
Current portion of long-term debt 170,335 170,473
Total current liabilities 937,646 853,023
Noncurrent liabilities
Deferred income taxes 20,255 22,842
Long-term debt, less current portion 509,033 337,764
Postretirement benefit liability 471,228 467,386
Accrued pension cost 66,464 56,528
Other noncurrent liabilities 98,833 101,776
Total noncurrent liabilities 1,165,813 986,296
Company obligated mandatorily redeemable
preferred capital securities of
subsidiary trust holding solely the
Company's debentures 200,000 200,000
Minority interests 169,404 169,788
Shareowners' equity
Preferred stock:
Authorized - 24,000,000 shares
(par value $1.00)
Issued - none
Common stock:
Authorized - 200,000,000 shares
(par value $1.25)
Issued - 117,150,593 shares,
including shares in treasury 146,438 146,438
Additional paid-in capital 493,516 503,346
Retained earnings 1,087,894 1,026,288
Cost of Common stock in treasury
(2000 - 38,768,351 shares;
1999 - 34,626,316 shares) (1,395,899) (1,190,894)
Employee stock plans (34,407) (38,836)
Accumulated other comprehensive income (19,939) (18,962)
Total shareowners' equity 277,603 427,380
Total liabilities and shareowners'
equity $ 2,750,466 $ 2,636,487
See notes to consolidated financial statements.
5
MAYTAG CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended
March 31
In thousands 2000 1999
Operating activities
Net income $ 75,923 $ 87,016
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest 4,452 (342)
Depreciation 36,786 34,296
Amortization 3,665 3,494
Deferred income taxes (8,585) (3,623)
Changes in working capital items exclusive
of business acquisitions:
Accounts receivable (118,874) (96,755)
Inventories (21,079) (27,764)
Other current assets 20,405 12,924
Other current liabilities 43,801 29,407
Pension assets and liabilities 9,909 6,369
Postretirement benefit liability 3,842 2,987
Other - net (4,603) (5,497)
Net cash provided by operating activities 45,642 42,512
Investing activities
Capital expenditures (36,878) (32,180)
Business acquisitions (3,551)
Total investing activities (36,878) (35,731)
Financing activities
Proceeds from issuance of notes payable 50,277 52,392
Repayment of notes payable (846) (9)
Proceeds from issuance of long-term debt 175,000 24,000
Repayment of long-term debt (3,870) (6,089)
Stock repurchases (208,723) (73,852)
Forward stock purchase amendment (9,595)
Stock options exercised and other common stock
transactions (477) 15,572
Dividends on common stock (14,317) (16,035)
Dividends on minority interest (4,918) (1,853)
Total financing activities (17,469) (5,874)
Effect of exchange rates on cash (20) 392
Increase in cash and cash equivalents (8,725) 1,299
Cash and cash equivalents at beginning of period 28,815 28,642
Cash and cash equivalents at end of period $ 20,090 $ 29,941
See notes to consolidated financial statements.
6
MAYTAG CORPORATION
Notes to Consolidated Financial Statements
March 31, 2000
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2000 are not necessarily indicative of the
results that are expected for the year ending December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
included in the Maytag Corporation annual report on Form 10-K for the year ended
December 31, 1999.
NOTE B--COMPREHENSIVE INCOME
Total comprehensive income and its components, net of related tax, for the first
quarter of 2000 and 1999 are as follows:
Three Months Ended
March 31
In thousands 2000 1999
Net income $ 75,923 $ 87,016
Unrealized gains (losses) on securities (1,023) 423
Foreign currency translation 46 626
Comprehensive income $ 74,946 $ 88,065
The components of accumulated other comprehensive income, net of related tax are
as follows:
March 31 December 31
In thousands 2000 1999
Minimum pension liability adjustment $ (4,430) $ (4,430)
Unrealized losses on securities (6,556) (5,533)
Foreign currency translation (8,953) (8,999)
Accumulated other comprehensive income $ (19,939) $ (18,962)
NOTE C--INVENTORIES
Inventories consisted of the following:
March 31 December 31
In thousands 2000 1999
Raw materials $ 66,641 $ 66,731
Work in process 70,688 72,162
Finished products 360,293 335,844
Supplies 7,905 9,615
Total FIFO cost 505,527 484,352
Less excess of FIFO cost over LIFO 80,329 80,232
Inventories $ 425,198 $ 404,120
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NOTE D--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
March 31
In thousands except per share data 2000 1999
Numerator for basic and diluted earnings
per share -- net income $ 75,923 $ 87,016
Denominator for basic earnings per share
-- weighted-average shares 80,151 88,686
Effect of dilutive securities:
Stock option plans 906 1,822
Restricted stock awards 92 141
Put options 4,266
Forward stock purchase contract 605
Potential dilutive common shares 5,264 2,568
Denominator for diluted earnings per
share -- adjusted weighted-average
shares 85,415 91,254
Basic earnings per share $ 0.95 $ 0.98
Diluted earnings per share $ 0.89 $ 0.95
NOTE E--CONTINGENCIES
Maytag has contingent liabilities arising in the normal course of business,
including: guarantees, repurchase agreements, pending litigation, environmental
remediation, taxes and other claims which are not considered to be significant
in relation to Maytag's consolidated financial position.
NOTE F--SEGMENT REPORTING
Maytag has three reportable segments: home appliances, commercial appliances and
international appliances. Maytag's home appliances segment manufactures major
appliances (laundry products, dishwashers, refrigerators, cooking appliances)
and floor care products. These products are sold primarily to major national
retailers and independent retail dealers in North America and targeted
international markets.
Maytag's commercial appliances segment manufactures commercial cooking and
vending equipment. These products are sold primarily to distributors, soft
drink bottlers, restaurant chains and dealers in North America and targeted
international markets.
The international appliances segment consists of Maytag's 50.5 percent
owned joint venture in China, Rongshida-Maytag, which manufactures laundry
products and refrigerators. These products are sold primarily to department
stores and distributors in China.
Maytag's reportable segments are distinguished by the nature of products
manufactured and sold and types of customers. Maytag's home appliances segment
has been further defined based on distinct geographical locations.
8
Financial information for Maytag's reportable segments consisted of the
following:
Three Months Ended
March 31
In thousands 2000 1999
Net sales
Home appliances $ 953,426 $ 926,448
Commercial appliances 111,135 136,746
International appliances 30,932 42,992
Consolidated total $ 1,095,493 $ 1,106,186
Operating income
Home appliances $ 146,009 $ 148,366
Commercial appliances 7,410 18,033
International appliances (170) (3,083)
Total for reportable segments 153,249 163,316
Corporate (10,214) (9,824)
Consolidated total $ 143,035 $ 153,492
March 31 December 31
In thousands 2000 1999
Total assets
Home appliances $ 1,893,462 $ 1,792,185
Commercial appliances 283,173 272,506
International appliances 243,289 249,581
Total for reportable segments 2,419,924 2,314,272
Corporate 330,542 322,215
Consolidated total $ 2,750,466 $ 2,636,487
The reconciliation of segment profit to consolidated income before income
taxes and minority interest consisted of the following:
Three Months Ended
March 31
In thousands 2000 1999
Total operating income for reportable
segments $ 153,249 $ 163,316
Corporate (10,214) (9,824)
Interest expense (15,090) (15,379)
Other - net (1,370) 565
Consolidated income before income
taxes and minority interest $ 126,575 $ 138,678
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Comparison of 2000 with 1999
Maytag Corporation ("Maytag") has three reportable segments: home appliances,
commercial appliances and international appliances. (See discussion and
financial information about Maytag's reportable segments in "SEGMENT REPORTING"
section of the Notes to Consolidated Financial Statements.)
Net Sales: Consolidated net sales were $1.095 billion in the first quarter of
2000, a decrease of 1 percent compared to the same period in 1999.
Home appliances net sales, which include major appliances and floor care
products, increased 3 percent in the first quarter of 2000 compared to 1999.
The net sales increase was due primarily to increased sales of floor care
products and export sales. Industry growth was strong in the first quarter for
both major appliances and floor care products. During the second half of the
year, Maytag expects revenue growth from the introduction of new products in
several categories and through new distribution initiatives.
Commercial appliances net sales, which include vending and foodservice
equipment, decreased 19 percent from the first quarter of 1999. The net sales
decrease was due primarily to the expected decrease in vending equipment sales
to a single major customer channel as well as a softening in industry demand.
The decline in industry demand is expected to continue through the first half of
the year and may continue through most of 2000. Maytag expects to introduce new
commercial appliances products during the second half of the year.
Net sales of international appliances, which consists of Maytag's 50.5
percent owned joint venture in China, were down 28 percent in the first quarter
of 2000 from the same period in 1999. The sales decrease was attributable to
lower laundry sales volume.
Gross Profit: Consolidated gross profit as a percent of sales decreased to 28.7
percent of sales in the first quarter of 2000 from 29.6 percent of sales in the
first quarter of 1999. The decrease in gross margin was due primarily to higher
warranty and research and development costs. Maytag expects warranty cost to
trend downward in the second half of the year and expects the trend in research
and development costs to continue as it invests in new product development.
Maytag expects raw material prices in 2000 to be slightly higher than 1999
levels.
Selling, General and Administrative Expenses: Consolidated selling, general and
administrative expenses were approximately the same in the first quarter of 2000
compared to 1999 at 15.6 percent of sales and 15.7 percent of sales,
respectively.
Operating Income: Consolidated operating income for the first quarter of 2000
decreased 7 percent to $143 million, or 13.1 percent of sales, compared to $153
million, or 13.9 percent of sales, in the same period in 1999.
Home appliances operating income decreased 2 percent in the first quarter
of 2000 compared to 1999. Operating margin for the first quarter of 2000 was
15.3 percent of sales compared to 16 percent of sales in 1999. The decrease in
operating margin was due primarily to the decrease in gross profit margins
discussed above.
Commercial appliances operating income decreased 59 percent in the first
quarter of 2000 compared to 1999. Operating margin for the first quarter of
2000 was 6.7 percent of sales compared to 13.2 percent of sales in 1999. The
decrease in operating margin was due primarily to the decrease in sales
10
discussed above as well as increased research and development spending related
to rapid cook product development.
International appliances reported an operating loss of $0.2 million in the
first quarter of 2000 compared to an operating loss of $3 million in the first
quarter of 1999. The decrease in operating loss was due to 1999 including
special provisions primarily related to uncollectible accounts receivable. The
economic environment in China and the Asian region continues to adversely impact
the operations of Rongshida-Maytag. Inventory levels of Rongshida-Maytag
continue at higher than planned levels.
Interest Expense: Interest expense for the first quarter of 2000 was 2 percent
lower than the first quarter of 1999 primarily due to lower interest rates.
Income Taxes: The effective tax rate for the first quarter of 2000 was 36.5
percent, a slight improvement from the 37.5 percent effective tax rate in the
first quarter of 1999.
Minority Interest: Minority interest increased by $4.8 million from the first
quarter of 1999 primarily because of the financing transactions that established
the Maytag Capital Trusts in the second half of 1999. For the first quarter of
2000, minority interest of $4.5 million consisted of the income attributable to
the noncontrolling interests of Anvil Technologies LLC of $1.9 million and
Maytag Capital Trusts of $3.0 million and the loss attributable to the
noncontrolling interest of Rongshida-Maytag of $0.4 million. In the first
quarter of 1999, minority interest consisted of the income attributable to the
noncontrolling interest of Anvil Technologies LLC of $1.9 million and the loss
attributable to the noncontrolling interest of Rongshida-Maytag of $2.2 million.
Net Income: Net income for the first quarter of 2000 was $75.9 million, or
$0.89 diluted earnings per share, compared to net income of $87 million, or
$0.95 diluted earnings per share in 1999. The decrease in net income was due
primarily to the decrease in operating income and increase in minority interest
discussed above. The decrease in diluted earnings per share was due to the
decrease in net income partially offset by the positive effect of Maytag's share
repurchase program. (See discussion of the share repurchase program in
"Liquidity and Capital Resources" section of this Management's Discussion and
Analysis.)
Liquidity and Capital Resources
Maytag's primary sources of liquidity are cash provided by operating activities
and borrowings. Detailed information on Maytag's cash flows is presented in the
Condensed Consolidated Statements of Cash Flows.
Net Cash Provided by Operating Activities: Cash flow provided by operating
activities consists primarily of net income adjusted for certain non-cash items,
changes in working capital items, and changes in pension assets and liabilities
and postretirement benefits. Non-cash items include depreciation and
amortization and deferred income taxes. Working capital items consist primarily
of accounts receivable, inventories, other current assets and other current
liabilities.
Net cash provided by operating activities increased marginally in the first
quarter of 2000 compared to the first quarter of 1999.
A portion of Maytag's accounts receivable is concentrated among major
national retailers. A significant loss of business with any of these retailers
could have an adverse impact on Maytag's ongoing operations.
Total Investing Activities: Maytag continually invests in its businesses for
11
new product designs, cost reduction programs, replacement of equipment, capacity
expansion and government mandated product requirements.
Capital expenditures in the first quarter of 2000 were $37 million compared
to $32 million in the first quarter of 1999. Maytag plans to invest
approximately $190 million in capital expenditures in 2000.
Effective January 1, 1999, Maytag acquired all of the outstanding shares of
Jade, a manufacturer of commercial ranges, refrigerators and residential ranges,
for approximately $19 million. In connection with the purchase, Maytag retired
debt and incurred transaction costs of $3.6 million and issued approximately 290
thousand shares of Maytag common stock at a value of $15.6 million. The
acquisition was accounted for as a purchase, and the results of its operation
have been included in the consolidated financial statements since the date of
acquisition.
Total Financing Activities: Dividend payments on Maytag's common stock in the
first quarter of 2000 were $14 million, or $0.18 per share, compared to $16
million, or $0.18 per share in 1999.
During the first quarter of 2000, Maytag repurchased 4.2 million shares at
a cost of $209 million. As of March 31, 2000, there were approximately 17
million shares which may be repurchased under existing board authorizations of
which 8 million shares are committed under put options contracts, if such
options are exercised. (See discussion of these put option contracts below.)
Maytag plans to continue the repurchase of shares over a non-specified period of
time.
During the first quarter of 2000, Maytag settled the forward stock purchase
contract associated with four million shares before its maturity date for $9.6
million. Maytag originally entered into the forward stock purchase contract
during 1997.
In connection with the share repurchase program, Maytag sells put options
which give the purchaser the right to sell shares of Maytag's common stock to
Maytag at specified prices upon exercise of the options. The put option
contracts allow Maytag to determine the method of settlement. Maytag's
objective in selling put options is to reduce the average price of repurchased
shares. As of March 31, 2000, there were 8 million put options outstanding with
strike prices ranging from $37.00 to $73.06; the weighted-average strike price
was $52.62.
Any funding requirements for future investing and financing activities in
excess of cash on hand and generated from operations will be supplemented by
borrowings. Maytag s commercial paper program is supported by a credit
agreement with a consortium of banks which provides revolving credit facilities
totaling $400 million. This agreement expires June 29, 2001 and includes
covenants for interest coverage and leverage which Maytag was in compliance with
at March 31, 2000. In 1999 Maytag filed a shelf registration statement with the
Securities and Exchange Commission providing the ability to issue an aggregate
of $400 million of debt securities of which $185 million was available as of
March 31, 2000. Maytag expects to issue these securities over a non-specified
period of time and expects to use the net proceeds from the sale of the
securities for general corporate purposes, including the funding of share
repurchases (including obligations under forward contracts and put options as
discussed above), capital expenditures, working capital, repayment or reduction
of long-term and short-term debt and the financing of acquisitions.
Maytag explores and may periodically implement arrangements to adjust its
obligations under various stock repurchase arrangements, including the
arrangements described above.
Market Risks
Maytag is exposed to foreign currency exchange risk related to its transactions,
12
assets and liabilities denominated in foreign currencies. To manage certain
foreign exchange exposures, Maytag enters into foreign currency forward and
option contracts. Maytag s policy is to hedge a portion of its anticipated
foreign currency denominated export sales transactions, which are denominated
primarily in Canadian dollars, for periods not exceeding twelve months.
Maytag also is exposed to commodity price risk related to Maytag's purchase
of selected commodities used in the manufacture of its products. To reduce the
effect of changing raw material prices for select commodities, Maytag has
entered into long-term contracts and commodity swap agreements with terms not
exceeding two years, to hedge a portion of its anticipated raw material
purchases on selected commodities.
Maytag also is exposed to interest rate risk in the portfolio of Maytag s
debt. The Company uses interest rate swap contracts to adjust the proportion of
total debt that is subject to variable and fixed interest rates. The swaps
involve the exchange of fixed and variable rate payments without exchanging the
notional principal amount.
There have been no material changes in the reported market risks of Maytag
since December 31, 1999. See further discussion of these market risks and
related financial instruments in the Maytag Corporation annual report on Form
10-K for the year ended December 31, 1999.
Contingencies
Maytag has contingent liabilities arising in the normal course of business or
from operations which have been discontinued or divested. (See discussion of
these contingent liabilities in "CONTINGENCIES" section of the Notes to
Consolidated Financial Statements.)
Forward-Looking Statements
This Management s Discussion and Analysis contains statements which are not
historical facts and are considered "forward-looking" within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are identified by their use of the terms: "expects," "intends," "may
impact," "plans," "should" or similar terms. These forward-looking statements
involve a number of risks and uncertainties that may cause actual results to
differ materially from expected results. These risks and uncertainties include,
but are not limited to, the following: business conditions and growth of
industries in which Maytag competes, including changes in economic conditions in
the geographic areas where Maytag s operations exist or products are sold;
timing, start-up and customer acceptance of newly designed products; shortages
of manufacturing capacity; competitive factors, such as price competition and
new product introductions; significant loss of business from a major national
retailer; the cost and availability of raw materials and purchased components;
union labor negotiations; progress on capital projects; the impact of business
acquisitions or dispositions; the costs of complying with governmental
regulations; level of share repurchases; litigation and other risk factors.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
See discussion of quantitative and qualitative disclosures about market risk in
"Market Risks" section of Management's Discussion and Analysis.
13
MAYTAG CORPORATION
Exhibits and Reports on Form 8-K
March 31, 2000
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
( 3) By-Laws of Registrant, as revised through February 10, 2000
(27) Financial Data Schedule - Quarter Ended March 31, 2000
(b) Reports on Form 8-K
Maytag filed a Form 8-K dated February 14, 2000 under Item 5, Other Events,
confirming its lower first quarter earnings expectations as well as its
alliance agreement with SANYO Electric Co., Ltd.
14
MAYTAG CORPORATION
Signatures
March 31, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAYTAG CORPORATION
Date: May 10, 2000
Gerald J. Pribanic
Executive Vice President and
Chief Financial Officer
Steven H. Wood
Vice President, Financial
Reporting and Audit and Chief
Accounting Officer
15