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 June 30, 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 June 30, 1995:
Common Stock, $1.25 Par Value - 107,613,839
Page 1 of 17
FORM 10-Q
MAYTAG CORPORATION
Quarter Ended June 30, 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 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Computation of Per Share Earnings 14
Computation of Ratio of Earnings to Fixed Charges 16
Financial Data Schedule 17
2
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Condensed Statements of Consolidated Income
(Unaudited)
(Thousands of dollars except per share data)
Second Quarter Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Net sales $ 803,479 $ 870,385 $1,623,612 $1,660,950
Cost of sales 603,146 640,769 1,202,055 1,226,844
Gross profit 200,333 229,616 421,557 434,106
Selling, general and
administrative expenses 128,135 138,850 269,325 273,314
Operating income 72,198 90,766 152,232 160,792
Interest expense (14,064) (19,075) (29,536) (37,475)
Loss on business
disposition (140,792) --- (140,792) ---
Other - net (1,121) (758) 202 1,062
Income (loss) before
income taxes, extraordinary
item and cumulative effect
of accounting change (83,779) 70,933 (17,894) 124,379
Income taxes 17,367 29,792 43,721 52,239
Income (loss) before
extraordinary item and
cumulative effect of
accounting change (101,146) 41,141 (61,615) 72,140
Extraordinary item - loss
on early retirement of debt (3,423) --- (3,423) ---
Cumulative effect of
accounting change --- --- --- (3,190)
Net income (loss) $ (104,569) $ 41,141 $ (65,038) $ 68,950
Income (loss) per average
share of Common stock:
Income (loss) before
extraordinary item and
cumulative effect of
accounting change $ (0.95) $ 0.39 $ (0.58) $ 0.68
Extraordinary item - loss
on early retirement of
debt (0.03) (0.03)
Cumulative effect of
accounting change (0.03)
Net income (loss) $ (0.98) $ 0.39 $ (0.61) $ 0.65
Dividends per Common share $ 0.125 $ 0.125 $ 0.250 $ 0.250
Average shares outstanding 106,981 106,796 106,924 106,719
See notes to condensed consolidated financial statements.
3
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition
June 30 December 31
1995 1994
(Unaudited)
(Thousands of dollars)
ASSETS
Current Assets
Cash and cash equivalents $ 17,692 $ 110,403
Accounts receivable 497,869 567,531
Inventories:
Finished products 206,053 254,345
Work in process, raw materials and
supplies 121,359 132,924
327,412 387,269
Deferred income taxes 48,264 45,589
Proceeds due from business
disposition 180,269 ---
Other current assets 11,903 19,345
Total current assets 1,083,409 1,130,137
Noncurrent Assets
Deferred income taxes 77,178 72,394
Pension investments 946 112,522
Intangible pension asset 84,653 84,653
Other intangibles 305,123 310,343
Other noncurrent assets 33,114 44,979
501,014 624,891
Property, Plant and Equipment 1,340,262 1,456,755
Less allowance for depreciation 679,394 707,456
Total property, plant and equipment 660,868 749,299
Total Assets $ 2,245,291 $ 2,504,327
See notes to condensed consolidated financial statements.
4
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition - Continued
June 30 December 31
1995 1994
(Unaudited)
(Thousands of dollars)
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Notes payable $ 77,930 $ 45,148
Accounts payable 154,425 212,441
Compensation to employees 47,506 61,311
Accrued liabilities 138,304 146,086
Income taxes payable --- 26,037
Current maturities of long-term
debt 3,089 43,411
Total current liabilities 421,254 534,434
Noncurrent liabilities
Deferred income taxes 33,629 38,375
Long-term debt 568,864 663,205
Postretirement benefits other
than pensions 421,128 412,832
Pension liability 64,592 59,363
Other noncurrent liabilities 64,641 64,406
Total noncurrent liabilities 1,152,854 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 475,441 477,153
Retained earnings 328,241 420,174
Cost of Common stock in treasury
(1995 - 9,536,754 shares; 1994-
9,813,893 shares) (212,560) (218,745)
Employee stock plans (61,241) (60,816)
Foreign currency translation (5,136) (32,492)
Total shareowners' equity 671,183 731,712
Total Liabilities and
Shareowners' Equity $ 2,245,291 $ 2,504,327
See notes to condensed consolidated financial statements.
5
MAYTAG CORPORATION
Condensed Statements of Consolidated Cash Flows
(Unaudited)
Six Months Ended
June 30
1995 1994
(Thousands of
Dollars)
Operating Activities
Net income (loss) $ (65,038) $ 68,950
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Loss on business disposition 140,792 ---
Depreciation and amortization 59,227 58,591
Deferred income taxes (14,775) 1,193
Changes in selected working capital items:
Inventories (43,058) (14,132)
Receivables (6,315) (106,673)
Other current assets 5,600 5,062
Reorganization reserve (903) (19,207)
"Free flights" reserve (388) (25,112)
Other current liabilities (17,902) 17,406
Net change in pension assets and liabilities 6,709 6,809
Postretirement benefits 8,296 5,849
Other - net 10,742 (4,752)
Net cash provided by (used in) operating
activities 82,987 (6,016)
Investing Activities
Cash impact of business disposition - net
non-cash assets of disposition ($305,278), less
loss included above ($140,792) and amount due from
disposition ($180,269) (15,783) ---
Capital expenditures - net (56,956) (29,309)
Net cash used in investing activities (72,739) (29,309)
Financing Activities
Decrease in long-term debt (131,555) (1,208)
Increase in notes payable 48,244 38,675
Stock options exercised and other common stock
transactions 4,018 6,354
Dividends (26,895) (26,763)
Net cash (used in) provided by financing
activities (106,188) 17,058
Effect of exchange rates on cash 3,229 2,460
Decrease in cash and cash equivalents (92,711) (15,807)
Cash and cash equivalents at beginning of year 110,403 31,730
Cash and cash equivalents at end of period $ 17,692 $ 15,923
See notes to condensed consolidated financial statements.
6
MAYTAG CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 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
six month period ended June 30, 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 second quarter of 1995 decreased 7.7 percent from the second
quarter of 1994 as reported, or 3.6 percent after excluding sales of Hoover
Australia which was sold in the fourth quarter of 1994. The decrease in sales
was mainly a result of a softer, intensely competitive selling environment in
the North American home appliance market. The North American Appliance Group
had second quarter sales of $661.8 million, down 3.6 percent from sales of
$686.5 million in the 1994 period. The 1995 appliance industry in the U.S. is
expected to be below the record shipment levels which occurred in 1994 due to
downward inventory adjustments by dealers and a slowdown in general economic
conditions. Dixie-Narco's sales in the second quarter were down 1.6 percent to
$59.2 million, compared to $60.2 million in the second three months of 1994.
Sales by Hoover Europe were down 5.3 percent to $82.4 million in the second
quarter of 1995, compared to $87.0 million in the second quarter of the prior
year. The Company sold its Hoover Europe division effective June 30, 1995.
Net sales for the first half of 1995 were down 2.2 percent from the first half
of 1994 as reported, but up 1.8 percent after excluding sales of Hoover
Australia. The North American Appliance Group had sales for the first six
months of 1995 of $1,328.5 million, up 0.9 percent from sales of $1,317.3
million in the same 1994 period. Dixie-Narco's sales for the first half of 1995
7
were up 12.4 percent to $113.9 million, compared to $101.4 million in the first
half of 1994. Hoover Europe's sales were up 2.7 percent to $181.2 million in
the first six months of 1995, compared to $176.4 million in the same period in
the prior year.
GROSS PROFIT
Gross margin as a percent of sales decreased 1.5 percentage points from the
second quarter and 0.1 percentage points from the first six months of 1994
primarily from an increase in material costs in North America and Europe and
lower volumes.
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 as compared to 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Second quarter selling, general and administrative expenses (SG&A) decreased
over 1994 in response to lower sales volumes. In the second quarter, SG&A
expenses decreased to 15.9 percent of sales from 16.0 percent in 1994. For the
first six months of 1995, SG&A expenses increased slightly to 16.6 percent of
sales from 16.5 percent in 1994.
OPERATING INCOME
Operating income in the second quarter of 1995 decreased 20.5 percent from 1994,
or 16.5 percent excluding Hoover Australia from 1994. The decrease in operating
income was driven by the decline in gross profit mentioned above. Operating
income in the North American Appliance Group decreased 8.4 percent to $77.3
million in the second quarter of 1995 from $84.3 million in the second quarter
of 1994. Vending equipment operating income increased 3.5 percent to $8.4
million from $8.1 million in 1994. Hoover Europe reported an operating loss of
$8.4 million in the second quarter of 1995, compared to an operating profit of
$2.2 million in the same period of 1994.
For the first half of 1995, operating income decreased 5.3 percent from 1994, or
1.6 percent excluding Hoover Australia from 1994. The North American Appliance
Group's operating income decreased 0.9 percent to $157.6 million from $159.0
million in the same period in 1994. Dixie-Narco's operating income increased
22.3 percent to $15.8 million from $12.9 million in the first six months of
1994. Hoover Europe had an operating loss of $7.2 million year-to-date,
compared to an operating loss of $1.5 million last year.
OTHER INCOME AND EXPENSE
In the second quarter, the Company sold its Hoover Europe division for $180.3
million. The pretax loss from the sale was $140.8 million and resulted in an
after-tax loss of $135.4 million or $1.27 per share.
8
INCOME TAXES
The significant fluctuation in the effective tax rate is due largely to the
impact of the sale of Hoover Europe. Excluding amounts relating to the loss on
the sale of Hoover Europe, the effective tax rate decreased to 40 percent in the
second quarter and first six months of 1995 from 42 percent in 1994. The
decrease is primarily due to tax benefits from an increase in export sales from
the United States.
EXTRAORDINARY ITEM
During the second quarter, the Company retired $43.7 million of long-term debt
at a cost of $3.4 million after-tax. In the third quarter of 1995, an
additional $26.6 million of long-term debt was retired early from a portion of
the proceeds from the sale of Hoover Europe at a cost of approximately $2
million after-tax.
NET INCOME
Excluding the $135.4 million after-tax loss on the sale of Hoover Europe in 1995
and the $3.4 million extraordinary item from the early retirement of debt in
1995, net income for the second quarter of 1995 was $34.2 million, or $0.32 per
share compared to last year's second quarter net income of $41.1 million, or
$0.39 per share.
Excluding the special items above and the $3.2 million cumulative effect of
accounting change in 1994, net income would have been $73.7 million, or $0.69
per share in 1995 compared to $72.1 million, or $0.68 per share in 1994. The
increase in net income was primarily due to a 21.2 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.
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 six months of 1995 improved
significantly over the same period in 1994. This was driven by a lower increase
in the selected working capital items mentioned above. Included in the working
capital improvement was the sale of $43 million of accounts receivable relating
to the operations of Maytag Financial Services which ceased in 1994. In
addition, cash outflows for 1994 included $44 million of payments for the 1992
reorganization of the European operations and the 1992/1993 European "free
flights" promotional programs. The funding of these events was substantially
completed in 1994.
9
Cash Flow From Investing Activities: The cash impact of the business
disposition represents the cash sold with the sale of Hoover Europe on June 30,
1995. The majority of the $180.3 million proceeds from the sale were received
in the third quarter of 1995.
The Company continually invests in its businesses to improve product design and
manufacturing processes and to increase capacity when needed.
Capital expenditures for the first six months of 1995 were $57.0 million
compared to $29.3 million in the first half of 1994. The higher capital
expenditures are a result of several capital projects that the Company will be
implementing over the next several years. This includes totals of $50 million
for a new high efficiency clothes washer and $160 million for a complete
redesign of the Company's refrigerator product lines. 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 $150 million and relate to
these new projects as well as other ongoing production improvements and product
enhancements.
Cash Flow From Financing Activities: Dividend payments for the first six months
of 1995 amounted to $26.9 million and were $26.8 million in the same period in
1994, or $0.25 per share for both periods.
The Company used cash flow generated from operations, commercial paper
borrowings and $82.1 million of proceeds from the sale of its home appliance
operations in Australia in 1994 to reduce long-term debt by $131.6 million in
the first six months of 1995. Included in the debt reduction is $89.8 million
for the retirement of a portion of the Company's outstanding long-term debt at
December 31, 1994. At June 30, 1995, the Company had $180.3 million of proceeds
due from the sale of Hoover Europe. The Company received the majority of the
proceeds in the third quarter and intends to use them to further reduce
outstanding debt and to fund operating activities. The Company's ratio of debt
to total capitalization decreased from 50.7 percent at December 31, 1994 to 49.2
percent at June 30, 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
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.
On August 3, 1995, the Company announced settlement of a class-action lawsuit
brought by former employees at its Dixie-Narco production facility in Ranson,
West Virginia, which was closed in 1991. The settlement amount is $16.5
million, or approximately $9.9 million after-tax, or $0.09 per share which will
be reported in the third quarter of 1995. The settlement is subject to final
approval by the court which is expected to occur in the fourth quarter of 1995.
10
In connection with the sale of Hoover Europe mentioned above, the Company has
made various warranties to the buyer, including the accuracy of tax net
operating losses in the United Kingdom, and has agreed to indemnify the buyer
for liability resulting from customer claims under the "free flights" promotions
in excess of the reserve balance at the time of sale. The Company has limited
liability in the event the buyer incurs a loss as a result of breach of the
warranties.
11
MAYTAG CORPORATION
Exhibits and Reports on Form 8-K
June 30, 1995
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company held its Annual Meeting of Shareholders on April 25, 1995.
(c) The following matters were voted upon at the Annual Meeting of
Shareholders:
1. The election of the nominees for the Board of Directors who will serve
for a term to expire at the 1998 Annual Meeting of Shareholders was
voted on by the shareholders. The nominees, all of whom were elected,
were Wayland R. Hicks, W. Ann Reynolds, John A. Sivright and Fred G.
Steingraber. The Inspectors of Election certified the following vote
tabulations:
FOR AGAINST NON-VOTES
Wayland R. Hicks 93,202,527 1,025,699 0
W. Ann Reynolds 93,215,779 1,012,447 0
John A. Sivright 93,212,448 1,015,778 0
Fred G. Steingraber 93,276,759 951,467 0
2. A proposal to select Ernst & Young LLP as independent auditors to audit
the financial statements to be included in the Annual Report to
Shareowners for 1995 was approved by the shareholders. The Inspectors
of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN NON-VOTES
93,424,103 469,878 334,246 0
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
The Company filed a Form 8-K dated May 30, 1995 relating to the sale of its
Hoover operations in Europe.
The Company filed a Form 8-K dated August 3, 1995 relating to the
settlement of a class-action lawsuit.
12
There were no other reports on Form 8-K filed during the quarter ended June
30, 1995.
MAYTAG CORPORATION
Signatures
June 30, 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 August 14, 1995 By s/s John P. Cunningham
John P. Cunningham, Jr.
Executive Vice President and Chief
Financial Officer
13
MAYTAG CORPORATION
Exhibit 11
Computation of Per Share Earnings
(Amounts in thousands except per share data)
Second Quarter Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
PRIMARY
Average shares outstanding 106,750 106,382 106,728 106,317
Net effect of dilutive
stock options--based on the
treasury stock method using
average market price 182 315 147 309
Employee stock ownership
plans 49 99 49 93
TOTAL 106,981 106,796 106,924 106,719
Income (loss) before
extraordinary item and
cumulative effect of
accounting change $(101,146) $ 41,141 $(61,615) $ 72,140
Extraordinary item - loss
on early retirement of debt (3,423) (3,423)
Cumulative effect of
accounting change (3,190)
Net income (loss) $(104,569) $ 41,141 $(65,038) $ 68,950
Per share amounts:
Income (loss) before
extraordinary item and
cumulative effect of
accounting change $ (0.95) $ 0.39 $ (0.58) $ 0.68
Extraordinary item - loss on
early retirement of debt (0.03) (0.03)
Cumulative effect of
accounting change (0.03)
Net income (loss) $ (0.98) $ 0.39 $ (0.61) $ 0.65
FULLY DILUTED
Average shares outstanding 106,750 106,382 106,728 106,317
Net effect of dilutive
stock options--based on the
treasury stock method using
average market price 182 349 215 351
Employee stock ownership plans 49 99 49 93
Assumed conversion of 6.5%
convertible debentures 267 411 267 411
TOTAL 107,248 107,241 107,259 107,172
14
Income (loss) before
extraordinary item and
cumulative effect of
accounting change $(101,146) $ 41,141 $(61,615) $ 72,140
Add 6.5% convertible
debenture interest net of
income tax effect 39 59 80 118
Extraordinary item - loss on
early retirement of debt (3,423) (3,423)
Cumulative effect of
accounting change (3,190)
Net income (loss) $(104,530) $ 41,200 $(64,958) $ 69,068
Per share amounts:
Income (loss)before
extraordinary item and
cumulative effect of
accounting change $ (0.94) $ 0.38 $ (0.57) $ 0.67
Extraordinary item - loss on
early retirement of debt (0.03) (0.03)
Cumulative effect of
accounting change (0.03)
Net income (loss) $ (0.97) $ 0.38 $ (0.61) $ 0.64
15
MAYTAG CORPORATION
Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands of dollars except ratios)
Six
Months
Ended Year Ended December 31
6-30-95 1994 1993 1992 1991 1990
Consolidated pretax
income from continuing
operations before
extraordinary item and
cumulative effect of
accounting change $(17,894) $241,337 $ 89,870 $ 7,546 $123,417 $159,405
Interest expense 29,536 74,077 75,364 75,004 75,159 81,966
Depreciation of
capitalized interest 921 1,772 1,546 933 348 57
Interest portion of
rental expense 5,118 10,722 10,480 11,264 11,177 9,183
Earnings $ 17,681 $327,908 $177,260 $ 94,747 $210,101 $250,611
Interest expense $ 29,536 $ 74,077 $ 75,364 $ 75,004 $ 75,159 $ 81,966
Interest capitalized 581 547 1,484 3,886 6,329 5,348
Interest portion of
rental expense 5,118 10,722 10,480 11,264 11,177 9,183
Fixed Charges $ 35,235 $ 85,346 $ 87,328 $ 90,154 $ 92,665 $ 96,497
Ratio of earnings to fixed (1)
charges 0.50 3.84 2.03 1.05 2.27 2.60
(1) Earnings are inadequate to cover fixed charges. The amount of additional
earnings required to achieve a ratio of 1.0 is $17.6 million.
16