UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 1995
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
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Maytag Corporation
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(Exact name of registrant as specified in its charter)
Delaware 42-0401785
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
403 West 4th Street North, Newton, Iowa 50208
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(Address of principal executive offices) (Zip Code)
515-792-8000
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(Registrant's telephone number, including area code)
_______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
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___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 31, 1995:
Common Stock, $1.25 Par Value - 107,559,251
Page 1 of 14
FORM 10-Q
MAYTAG CORPORATION
Quarter Ended March 31, 1995
I N D E X
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Statements of Consolidated Income 3
Condensed Statements of Consolidated Financial Condition 4
Condensed Statements of Consolidated Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Computation of Per Share Earnings 12
Computation of Ratio of Earnings to Fixed Charges 13
Financial Data Schedule 14
2
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Condensed Statements of Consolidated Income
(Unaudited)
(Thousands of dollars except per share data)
First Quarter Ended
March 31
1995 1994
Net sales $ 820,133 $ 790,565
Cost of sales 598,909 586,075
Gross profit 221,224 204,490
Selling, general and administrative
expenses 141,190 134,464
Operating income 80,034 70,026
Interest expense (15,472) (18,400)
Other - net 1,323 1,820
Income before income taxes and
cumulative effect of accounting change 65,885 53,446
Income taxes 26,354 22,447
Income before cumulative effect of
accounting change 39,531 30,999
Cumulative effect of accounting change (3,190)
Net income $ 39,531 $ 27,809
Income per average share of Common stock:
Income before cumulative effect of
accounting change $ 0.37 $ 0.29
Cumulative effect of accounting change (0.03)
Net income per Common share $ 0.37 $ 0.26
Dividends per Common share $ .125 $ .125
Average shares outstanding 106,867 106,642
See notes to condensed consolidated financial statements.
3
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition
March 31 December 31
1995 1994
(Unaudited)
(Thousands of dollars)
ASSETS
Current Assets
Cash and cash equivalents $ 18,416 $ 110,403
Accounts receivable 601,627 567,531
Inventories:
Finished products 275,084 254,345
Work in process, raw materials and
supplies 143,131 132,924
418,215 387,269
Deferred income taxes 45,620 45,589
Other current assets 16,705 19,345
Total current assets 1,100,583 1,130,137
Noncurrent Assets
Deferred income taxes 75,694 72,394
Pension investments 114,058 112,522
Intangible pension asset 84,653 84,653
Intangibles 308,019 310,343
Other noncurrent assets 41,258 44,979
623,682 624,891
Property, Plant and Equipment 1,483,827 1,456,755
Less allowance for depreciation 735,464 707,456
Total property, plant and equipment 748,363 749,299
Total Assets $ 2,472,628 $ 2,504,327
See notes to condensed consolidated financial statements.
4
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition - Continued
March 31 December 31
1995 1994
(Unaudited)
(Thousands of dollars)
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Notes payable $ 8,171 $ 45,148
Accounts payable 233,554 212,441
Compensation to employees 59,285 61,311
Accrued liabilities 158,487 146,086
Income taxes payable 38,392 26,037
Current maturities of long-term
debt 3,655 43,411
Total current liabilities 501,544 534,434
Noncurrent liabilities
Deferred income taxes 38,090 38,375
Long-term debt 615,698 663,205
Postretirement benefits other
than pensions 417,100 412,832
Pension liability 60,019 59,363
Other noncurrent liabilities 70,416 64,406
Total noncurrent liabilities 1,201,323 1,238,181
Shareowners' Equity
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 475,681 477,153
Retained earnings 446,261 420,174
Cost of Common stock in treasury
(1995 - 9,591,342 shares; 1994-
9,813,893 shares) (213,784) (218,745)
Employee stock plans (61,832) (60,816)
Foreign currency translation (23,003) (32,492)
Total shareowners' equity 769,761 731,712
Total Liabilities and
Shareowners' Equity $ 2,472,628 $ 2,504,327
See notes to condensed consolidated financial statements.
5
MAYTAG CORPORATION
Condensed Statements of Consolidated Cash Flows
(Unaudited)
Three Months Ended
March 31
1995 1994
(Thousands of
Dollars)
Operating Activities
Net income $ 39,531 $ 27,809
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 29,090 29,624
Deferred income taxes (3,645) 9,662
Changes in selected working capital items:
Inventories (29,115) (37,408)
Receivables (28,910) (62,489)
Other current assets 2,750 3,687
Reorganization reserve (213) (12,220)
"Free flights" reserve (218) (19,165)
Other current liabilities 39,327 32,210
Net change in pension assets and liabilities 2,914 3,966
Postretirement benefits 4,268 7,740
Other - net 10,288 (10,905)
Net cash provided by (used in) operating
activities 66,067 (27,489)
Investing Activities
Capital expenditures - net (21,079) (12,988)
Net cash used in investing activities (21,079) (12,988)
Financing Activities
Decrease in long-term debt (87,449) (1,072)
(Decrease) increase in notes payable (40,440) 43,789
Stock options exercised and other common stock
transactions 2,473 576
Dividends (13,444) (13,373)
Net cash (used in) provided by financing
activities (138,860) 29,920
Effect of exchange rates on cash 1,885 1,558
Decrease in cash and cash equivalents (91,987) (8,999)
Cash and cash equivalents at beginning of year 110,403 31,730
Cash and cash equivalents at end of period $ 18,416 $ 22,731
See notes to condensed consolidated financial statements.
6
MAYTAG CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 1995
(Unaudited)
Basis of Presentation
The accompanying unaudited condensed 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, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995. 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, 1994.
Certain reclassifications have been made to prior years' financial statements to
conform with the 1995 presentation.
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
COMPARISON OF 1995 WITH 1994
NET SALES
Net sales in the first quarter of 1995 increased 3.7 percent from the first
quarter of 1994 as reported, or 7.7 percent excluding sales of Hoover Australia
which was sold in the fourth quarter of 1994. The increase in sales was mainly
a result of strong North American home appliance and vending equipment sales.
North American appliance sales were up 5.2 percent to $666.7 million in 1995,
driven primarily by market share gains in virtually all product categories.
There is some evidence that the appliance industry in the U.S. may not
experience much growth during the remainder of 1995 due to a slowdown in general
economic conditions. In addition, industry performance was strong in 1994.
Dixie-Narco's sales in the first quarter were up 32.8 percent to $54.7 million
in 1995 due to increased demand for its core soft drink vending machines and the
sales of its new glass door merchandiser. The significant growth in vending
equipment sales experienced in the first quarter is not expected to continue for
the remainder of the year. Sales by the Hoover European Appliance Group were up
10.5 percent to $98.7 million in the first quarter of 1995, primarily due to
favorable currency translation.
GROSS PROFIT
Gross profit as a percent of sales increased 1.1 percentage points from the
first quarter of 1994 primarily from improvements in both segments. The
improvements were primarily due to favorable product mix, volume-related factory
efficiencies and cost cutting initiatives.
7
The Company continues to experience cost increases in many commodities,
particularly steel, plastics and corrugated materials. A portion of these
increases is expected to be offset with internal cost reduction initiatives.
Through these initiatives, the overall commodity cost escalation is expected to
be contained to the low single-digit percent range. This will cause pressure on
operating margins during the remainder of 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses (SG&A) for the first quarter
increased to 17.2 percent of sales in 1995 from 17.0 percent in 1994. Included
in first quarter SG&A was a $5.5 million bad debt provision for an appliance
dealer that went into bankruptcy. Excluding this charge, SG&A expenses would
have been up slightly but down as a percent of sales.
OPERATING INCOME
Consolidated operating income for the first quarter of 1995 totalled $80
million, an increase of 14.3 percent over 1994. Operating income in the North
American Appliance Group increased 7.6 percent to $80.3 million in the first
quarter of 1995. Vending equipment operating income increased 53.8 percent to
$7.4 million. Hoover Europe reported an operating profit of $1.2 million in the
first quarter of 1995, compared to an operating loss of $3.7 million in the same
period of 1994. The improvement in operating income in all business units was
driven by the improvement in gross margin mentioned above. The uncertainties
regarding appliance industry growth in the U.S. and material cost increases will
make year-over year operating income growth difficult to achieve the remainder
of the year.
INCOME TAXES
The effective tax rate decreased to 40 percent in 1995 from 42 percent in 1994.
This was primarily due to improved profitability of Hoover Europe and tax
benefits from an increase in export sales from the United States.
NET INCOME
Net income for the first quarter of 1995 was $39.5 million or $.37 per share, up
42.2 percent over the same period in 1994. Excluding the cumulative effect of
adopting Financial Accounting Standards Board No. 112, "Employers' Accounting
for Postemployment Benefits" which the Company adopted in the first quarter of
1994, net income was up 27.5 percent from $31.0 million or $.29 per share in
1994. The increase in net income was primarily due to higher operating income,
a 15.9 percent reduction in interest expense and the lower effective tax rate
mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by operating
activities and external debt. Detailed information on the Company's cash flows
is presented in the Statements of Consolidated Cash Flows.
8
Cash Flow From Operating Activities: Cash flow generated from operating
activities consists of net income adjusted for certain non-cash income and
expenses and changes in working capital. Non-cash income and expenses include
items such as depreciation, amortization and deferred income taxes. Working
capital consists primarily of accounts receivable, inventory and other current
liabilities.
Cash flow from operating activities in the first quarter of 1995 improved
significantly over the same period in 1994. This was driven primarily by higher
earnings, offset by a lower increase in the selected working capital items
mentioned above. Included in the working capital improvement was the sale of
$25 million of accounts receivable relating to the operations of Maytag
Financial Services which ceased in 1994. In addition, cash outflows for 1994
included $32 million of payments for the 1992 reorganization of the European
operations and the 1993 European "free flights" promotional programs. The
funding of these events was substantially completed in 1994.
Cash Flow From Investing Activities: The Company continually invests in its
businesses to improve product design and manufacturing processes and to increase
capacity when needed.
The higher capital expenditures for the first quarter of 1995 compared to the
same period of 1994 are a result of several new capital projects that the
Company will be implementing over the next several years. This includes $50
million for a new high efficiency clothes washer, $160 million for a complete
redesign of the Company's refrigerator product lines and manufacturing processes
and $14 million for a dishwasher plant capacity expansion. The new clothes
washer will be designed to comply with anticipated government regulations
dealing with energy usage and will use water more efficiently. The
refrigeration project will incorporate changes expected to be required by 1998
Department of Energy refrigeration standards and the upcoming ban on
chlorofluorocarbons ("CFCs"). Planned capital expenditures for 1995 approximate
$175 million and relate to these new projects as well as other ongoing
production improvements and product enhancements.
Cash Flow From Financing Activities: Dividend payments in the first quarter of
1995 and 1994 amounted to $13.4 million or $.125 per share.
The Company used cash flow generated from operations and $82.1 million of
proceeds from the sale of its home appliance operations in Australia in 1994 to
reduce commercial paper borrowings and long-term debt by $154.1 million in the
first quarter of 1995. Included in the debt reduction is $46 million for the
retirement of a portion of the Company's outstanding 8.875% notes due in 1997,
included in long-term debt at December 31, 1994. The cost of early retirement
of the notes was not significant. The Company's ratio of debt to total
capitalization decreased from 50.7 percent at December 31, 1994 to 44.9 percent
at March 31, 1995.
The Company is contingently liable for guarantees of indebtedness owed by a
third party ("the borrower") of $24 million relating to the sale of one of its
9
manufacturing facilities in 1992. The borrower is performing under the payment
terms of the loan agreement; however, it is currently in default of certain
financial covenants. The indebtedness is collateralized by the assets of the
borrower. The Company also has other commitments to the borrower totalling $6
million.
10
MAYTAG CORPORATION
Exhibits and Reports on Form 8-K
March 31, 1995
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Computation of Per Share Earnings
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended March 31, 1995, the Company filed a Form 8-K dated
January 11, 1995 relating to the sale of its Hoover operations in Australia
and New Zealand.
There were no other reports on Form 8-K filed during the quarter ended
March 31, 1995.
MAYTAG CORPORATION
Signatures
March 31, 1995
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 12, 1995 By John P. Cunningham, Jr.
John P. Cunningham, Jr.
Executive Vice President and Chief
Financial Officer
11
MAYTAG CORPORATION
Exhibit 11
Computation of Per Share Earnings
(Amounts in thousands except per share data)
Three Months
Ended March 31
1995 1994
PRIMARY
Average shares outstanding 106,706 106,252
Net effect of dilutive stock options--
based on the treasury stock method using
average market price 113 303
Employee stock ownership plans 48 87
TOTAL 106,867 106,642
Income before cumulative effect of
accounting changes $ 39,531 $ 30,999
Cumulative effect of accounting changes (3,190)
Net income $ 39,531 $ 27,809
Per share amounts:
Income before cumulative effect of
accounting changes $ .37 $ .29
Cumulative effect of accounting changes (.03)
Net income $ .37 $ .26
FULLY DILUTED
Average shares outstanding 106,706 106,252
Net effect of dilutive stock options--
based on the treasury stock method using
average market price 248 352
Employee stock ownership plans 48 87
Assumed conversion of 6.5% convertible
debentures 274 411
TOTAL 107,276 107,102
Income before cumulative effect of
accounting changes $ 39,531 $ 30,999
Add 6.5% convertible debenture interest
net of income tax effect 41 59
Cumulative effect of accounting changes (3,190)
Net income $ 39,572 $ 27,868
Per share amounts:
Income before cumulative effect of
accounting changes $ .37 $ .29
Cumulative effect of accounting changes (.03)
Net income $ .37 $ .26
12
MAYTAG CORPORATION
Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands of dollars except ratios)
Three
Months
Ended Year Ended December 31
3-31-95 1994 1993 1992 1991 1990
Consolidated pre-tax
income from
continuing
operations before
cumulative effect
of accounting
changes $ 65,885 $241,337 $ 89,870 $ 7,546 $123,417 $159,405
Interest expense 15,472 74,077 75,364 75,004 75,159 81,966
Depreciation of
capitalized
interest 324 1,772 1,546 933 348 57
Interest portion of
rental expense 2,470 10,722 10,480 11,264 11,177 9,183
Earnings $ 84,151 $327,908 $177,260 $ 94,747 $210,101 $250,611
Interest expense $ 15,472 $ 74,077 $ 75,364 $ 75,004 $ 75,159 $ 81,966
Interest capitalized 155 547 1,484 3,886 6,329 5,348
Interest portion of
rental expense 2,470 10,722 10,480 11,264 11,177 9,183
Fixed Charges $ 18,097 $ 85,346 $ 87,328 $ 90,154 $ 92,665 $ 96,497
Ratio of earnings to
fixed charges 4.65 3.84 2.03 1.05 2.27 2.60
13