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, 1996
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
(Exact name of registrant as specified in its charter)
Delaware 42-0401785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
403 West 4th Street North, Newton, Iowa 50208
(Address of principal executive offices) (Zip Code)
515-792-7000
(Registrant's telephone number, including area code)
Not applicable
(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, 1996:
Common Stock, $1.25 Par Value - 104,306,940
Page 1 of 16
FORM 10-Q
MAYTAG CORPORATION
Quarter Ended March 31, 1996
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 11
Item 6. Exhibits and Reports on Form 8-K 12
Computation of Per Share Earnings 14
Computation of Ratio of Earnings to Fixed Charges 15
Financial Data Schedule 16
2
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Condensed Statements of Consolidated Income
(Unaudited)
(Thousands of dollars except per share data)
Three Months Ended
March 31
1996 1995
Net sales $ 731,246 $ 820,133
Cost of sales 528,819 598,909
Gross profit 202,427 221,224
Selling, general and
administrative expenses 125,726 141,190
Restructuring charge 40,000
Operating income 36,701 80,034
Interest expense (10,902) (15,472)
Other - net 1,064 1,323
Income before income taxes 26,863 65,885
Income taxes 10,745 26,354
Net income $ 16,118 $ 39,531
Income per weighted average share of
Common stock:
Net income $ 0.15 $ 0.37
Dividends per Common share $ 0.140 $ 0.125
Weighted average shares outstanding 105,465 106,867
See notes to condensed consolidated financial statements.
3
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition
March 31 December 31
1996 1995
(Unaudited)
(Thousands of dollars)
ASSETS
Current Assets
Cash and cash equivalents $ 57,750 141,214
Accounts receivable 460,389 417,457
Inventories:
Finished products 196,940 163,968
Work in process, raw materials and
supplies 87,334 101,151
284,274 265,119
Deferred income taxes 41,431 42,785
Other current assets 49,005 43,559
Total current assets 892,849 910,134
Noncurrent Assets
Deferred income taxes 83,251 91,610
Pension investments 1,398 1,489
Intangible pension asset 91,291 91,291
Other intangibles 297,795 300,086
Other noncurrent assets 32,611 29,321
506,346 513,797
Property, Plant and Equipment 1,450,330 1,411,926
Less allowance for depreciation 733,591 710,791
Total property, plant and equipment 716,739 701,135
Total Assets $ 2,115,934 $ 2,125,066
See notes to condensed consolidated financial statements.
4
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition - Continued
March 31 December 31
1996 1995
(Unaudited)
(Thousands of dollars)
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Accounts payable $ 173,878 $ 142,676
Compensation to employees 50,757 61,644
Accrued liabilities 143,386 156,041
Restructuring reserve 31,783
Income taxes payable 3,141
Current maturities of long-term debt 3,499 3,201
Total current liabilities 403,303 366,703
Noncurrent Liabilities
Deferred income taxes 13,600 14,367
Long-term debt 534,944 536,579
Postretirement benefits other than
pensions 435,085 428,478
Pension liability 59,478 88,883
Other noncurrent liabilities 53,501 52,705
Total noncurrent liabilities 1,096,608 1,121,012
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 472,273 472,602
Retained earnings 345,751 344,346
Cost of Common stock in treasury
(1996 - 12,843,653 shares; 1995 -
11,745,395 shares) (277,821) (255,663)
Employee stock plans (57,690) (57,319)
Pension liability adjustment to
equity (5,656) (5,656)
Foreign currency translation (7,272) (7,397)
Total shareowners' equity 616,023 637,351
Total Liabilities and Shareowners'
Equity $ 2,115,934 $ 2,125,066
See notes to condensed consolidated financial statements.
5
MAYTAG CORPORATION
Condensed Statements of Consolidated Cash Flows
(Unaudited)
Three Months Ended
March 31
1996 1995
(Thousands of Dollars)
Operating Activities
Net income $ 16,118 $ 39,531
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 27,099 29,090
Deferred income taxes 8,946 (3,645)
Restructuring charge 40,000
Changes in selected working capital items:
Inventories (19,155) (29,115)
Receivables (42,932) (28,910)
Other current assets (5,446) 2,750
Restructuring reserve (8,217)
Reorganization reserve (213)
"Free flights" reserve (218)
Other current liabilities 4,519 39,327
Net change in pension assets and liabilities (29,314) 2,914
Postretirement benefits 6,607 4,268
Other - net (2,494) 10,288
Net cash provided by (used in) operating
activities (4,269) 66,067
Investing Activities
Capital expenditures - net (40,385) (21,079)
Total investing activities (40,385) (21,079)
Financing Activities
Decrease in long-term debt (1,337) (87,449)
Treasury stock purchases (32,231)
Decrease in notes payable (40,440)
Stock options exercised and other common stock
transactions 9,374 2,473
Dividends (14,713) (13,444)
Total financing activities (38,907) (138,860)
Effect of exchange rates on cash 97 1,885
Decrease in cash and cash equivalents (83,464) (91,987)
Cash and cash equivalents at beginning of year 141,214 110,403
Cash and cash equivalents at end of period $ 57,750 $ 18,416
See notes to condensed consolidated financial statements.
6
MAYTAG CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 1996
(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, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. 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, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
COMPARISON OF 1996 WITH 1995
NET SALES
Net sales in the first quarter of 1996 decreased 10.8 percent from the first
quarter of 1995 as reported; however, after excluding sales totaling $98.7
million in the first quarter of 1995 made by the company's home appliance
operations in Europe ("European Operations"), which were sold with a disposition
date of June 30, 1995, sales in the first quarter of 1996 increased 1.4 percent
from the comparable quarter of 1995.
The North American Appliance Group had first quarter sales of $682.6 million, up
2.4 percent from sales of $666.7 million in the comparable 1995 period. The
increase in sales is primarily driven by new product introductions in the floor
care business. The industry trade association projects 1996 appliance sales in
the U.S. to exceed 1995 levels by one to two percent.
Vending equipment sales in the first quarter of 1996 were $48.6 million, down
11.1 percent from 1995. Sales declined 3.7 percent compared to last year after
excluding sales totaling $4 million in the first quarter of 1995 made by a
Dixie-Narco manufacturing operation in Eastlake, Ohio ("Eastlake Operation")
which designed and manufactured currency validators and electronic components
used in the gaming and vending industries and which was sold in December 1995.
Dixie-Narco's headquarters and vending machine manufacturing facility in
Williston, SC, are not affected by this business disposition. The decrease in
sales is a result of a comparison to the first quarter of 1995 in which there
was strong demand for a new glass front cooler and a decrease in vender sales
due to a shift in consumer preference from traditional venders to Dixie-Narco's
new flexible vender, which maximizes the different sizes and types of beverage
selections and is not yet in full production.
7
GROSS PROFIT
Gross margin as a percent of sales in the first quarter of 1996 increased to
27.7 percent of sales from 27.0 percent of sales in the first three months of
1995. The main reason for the increase was the divestiture of the lower margin
European Operations.
Margins decreased slightly in the North American Appliance Group due to lower
factory utilization and an increase in research and development spending
associated with upcoming new model introductions. In addition, an increase in
distribution costs was experienced related to the transition into new regional
distribution centers. The increased distribution costs are expected to continue
throughout 1996 as the transition continues. These factors were partially
offset by favorable brand mix. Vending equipment margins also decreased due to
increased manufacturing costs associated with bringing the new flexible vender
into production.
In 1995, the Company experienced average increases in raw material prices of
approximately 2.5 percent. The Company expects raw material prices to decrease
moderately throughout 1996, however, the impact of the expected decrease was not
significant in the first quarter of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
First quarter selling, general and administrative expenses (SG&A) as a percent
to sales remained flat at 17.2 percent of sales in 1996 and 1995. Increased
sales promotion spending as a result of competitive conditions was offset by a
decrease in bad debt expense.
RESTRUCTURING CHARGE
During the first quarter of 1996, the Company announced the restructuring of its
major home appliance business designed to strengthen its position in the
industry and to deliver improved results to both customers and shareowners.
This includes the consolidation of two business units into a single business
unit which will manage the operations of all of the major home appliance brands
and the closing of a cooking products plant in Indianapolis, Indiana, with
transfer of that production to the Company's plant in Cleveland, Tennessee.
As a result of this restructuring, the Company recorded a one-time restructuring
charge of $40 million, or $24 million after-tax. This charge is primarily
related to the costs associated with the consolidation of cooking products
production and consolidation of the two business units. Of this $40 million
restructuring charge, it is estimated that cash expenditures of approximately
$26 million will be incurred in 1996.
During the first quarter, the Company incurred approximately $8 million of
costs, the majority of which were cash expenditures, against the $40 million
reserve established for this restructuring. In addition, the Company
anticipates an additional $10 million of restructuring costs, not included in
the one-time restructuring charge, to be incurred during the remainder of 1996
which will be reflected as an expense in the period when incurred. No
significant amounts were incurred in the first quarter for these additional
restructuring costs.
8
OPERATING INCOME
Operating income for the first quarter of 1996 was $36.7 million, or 5.0 percent
of sales, compared to $80 million, or 9.8 percent of sales, in 1995. Excluding
the $40 million restructuring charge in 1996, operating income for the first
quarter was $76.7 million, or 10.5 percent of sales. The increase in operating
margin is primarily due to the 1995 sale of the lower margin European
Operations. Excluding the results of the European Operations in 1995, operating
income was $78.8 million, or 10.9 percent of sales, in the first quarter of
1995.
INTEREST EXPENSE
Interest expense decreased 29.5 percent from the prior year due to debt
reduction from the application of proceeds from the 1994 sale of the Company's
home appliance operations in Australia and New Zealand, the 1995 sale of the
European Operations and from cash provided by operations.
INCOME TAXES
The Company's effective income tax rate for the first quarter of 1996 and the
first quarter of 1995 was 40 percent.
NET INCOME
Net income in the first quarter of 1996 was $16.1 million, or $0.15 per share.
Excluding the $24 million after-tax restructuring charge in 1996, income for the
first quarter of 1996 would have been $40.1 million, or $0.38 per share,
compared to income of $39.5 million, or $0.37 per share in 1995. Income related
to the divested European Operations and Eastlake Operations was not significant
to consolidated income in the first quarter of 1995.
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.
Net Cash Provided By (Used In) 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, the restructuring charge and
deferred income taxes. Working capital consists primarily of accounts
receivable, inventory and other current liabilities.
Cash flow from (used in) operating activities in the first three months of 1996
decreased from 1995 primarily due to a $40 million pension contribution made in
the first quarter of 1996. In addition, the increase in other current
liabilities was lower than 1995 due to lower income taxes payable and the
settlement of the guarantee of indebtedness recognized as a charge in the fourth
quarter of 1995 which required a $25 million cash outflow in the first quarter
of 1996.
Total Investing Activities: The Company continually invests in its businesses
to improve product design and manufacturing processes and to increase capacity
when needed.
9
Capital expenditures for the first three months of 1996 were $40.4 million
compared to $21.1 million in the first three months of 1995. The higher capital
spending is due to the continuation of several major capital projects that the
Company intends to implement over the next several years. These projects
include a new high efficiency clothes washer and a complete redesign of the
Company's refrigerator product lines. Planned capital expenditures for 1996 are
approximately $190 million and relate to these projects as well as other ongoing
production improvements and product enhancements. Capital spending in 1996
includes approximately $9 million of interest expense which will be capitalized
as a result of the major capital projects described above.
Total Financing Activities: Dividend payments for the first three months of
1996 amounted to $14.7 million, or $0.14 per share, compared to $13.4 million,
or $0.125 per share in the same period in 1995.
In the fourth quarter of 1995, the Company commenced a stock repurchase program
to buy up to 10.8 million shares of the Company's outstanding Common stock.
Through March 31, 1996, 4.3 million shares had been repurchased in the program
at a total cost of $87 million. The shares repurchased did not have a material
impact on earnings per share in the first quarter of 1996. The repurchase
program is expected to continue periodically for an unspecified length of time.
Any funding requirements for future capital expenditures and other cash
requirements in excess of cash on hand and generated from future operations will
be supplemented by the issuance of commercial paper, debt securities and bank
borrowings. The Company'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 July 27, 2000 and includes
covenants for interest coverage and leverage.
CONTINGENCIES/OTHER
In connection with the sale of the European Operations, the terms of the
contract provide for a post closing adjustment to the price under which the
Company has asserted an additional amount of approximately $15 million is owed
by the buyer. The post closing adjustment and various warranty claims asserted
by the buyer are in dispute and may ultimately depend on the decision of an
independent third party. In connection with the sale, 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
liabilities resulting from customer claims under the "free flights" promotions
in excess of the reserve balance at the time of sale. There are limitations on
the Company's liability in the event the buyer incurs a loss as a result of
breach of the warranties. The Company does not expect the resolution of these
items to have a material adverse effect on its financial condition.
In 1995, the Company announced that it will conduct an in-home inspection
program to eliminate a potential problem with a small electrical component in
Maytag brand dishwashers. Although the ultimate cost of the repair will not be
known until the inspection program is complete, it is not expected to have a
material impact on the Company's results. The Company is currently negotiating
with the supplier of the component regarding reimbursement.
10
MAYTAG CORPORATION
March 31, 1996
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 30, 1996.
(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 1999 Annual Meeting of Shareholders was
voted on by the shareholders. The nominees, all of whom were elected,
were Barbara R. Allen, Howard L. Clark,Jr., Leonard A. Hadley, Robert
D. Ray and Peter S. Willmott. The Inspectors of Election certified the
following vote tabulations:
FOR AGAINST NON-VOTES
Barbara R. Allen 89,191,866 1,026,879 0
Howard L. Clark,Jr. 88,710,910 1,507,835 0
Leonard A. Hadley 89,133,730 1,085,015 0
Robert D. Ray 89,174,785 1,043,960 0
Peter S. Willmott 89,306,777 911,968 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
Shareholders for 1996 was approved by the shareholders. The Inspectors
of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN NON-VOTES
89,489,212 447,751 281,782 0
3. A proposal to adopt the Maytag Corporation 1996 Employee Stock
Incentive Plan was approved by the shareholders.
FOR AGAINST ABSTAIN NON-VOTES
64,184,337 14,463,594 880,873 10,689,941
11
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 February 9, 1996 indicating the Company
will take 1996 charges of $50 million for restructuring costs to streamline
its major home appliance business.
12
MAYTAG CORPORATION
Signatures
March 31, 1996
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
s/s Gerald J. Pribanic
Date May 15, 1996
Gerald J. Pribanic
Executive Vice President and Chief
Financial Officer
s/s Steven H. Wood
Steven H. Wood
Vice President, Financial Reporting
and Audit and Chief Accounting
Officer
13
MAYTAG CORPORATION
Exhibit 11
Computation of Per Share Earnings
(Amounts in thousands except per share data)
Three Months Ended
March 31
1996 1995
PRIMARY
Weighted average shares outstanding 104,731 106,706
Net effect of dilutive
stock options--based on the
treasury stock method using average
market price 665 113
Employee stock ownership plans 69 48
TOTAL 105,465 106,867
Net income $ 16,118 $ 39,531
Per share amounts:
Net income $ 0.15 $ 0.37
FULLY DILUTED
Weighted average shares outstanding 104,731 106,706
Net effect of dilutive
stock options--based on the treasury
stock method using period end market
price 701 248
Employee stock ownership plans 69 48
Assumed conversion of 6.5%
convertible debentures 274
TOTAL 105,501 107,276
Net income $ 16,118 $ 39,531
Add 6.5% convertible debenture
interest net of income tax effect 41
Net income $ 16,118 $ 39,572
Per share amounts:
Net income $ 0.15 $ 0.37
14
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
3-31-96 1995 1994 1993 1992 1991
Consolidated pretax
income from
continuing operations
before extraordinary
item and cumulative
effect of accounting
change $ 26,863 $ 59,804 $241,337 $ 89,870 $ 7,546 $123,417
Interest expense 10,902 52,087 74,077 75,364 75,004 75,159
Depreciation of
capitalized interest 1,302 1,695 1,772 1,546 933 348
Interest portion of
rental expense 1,597 8,789 10,722 10,480 11,264 11,177
Earnings $ 40,664 $122,375 $327,908 $177,260 $94,747 $210,101
Interest expense $10,902 $ 52,087 $ 74,077 $ 75,364 $75,004 $ 75,159
Interest capitalized 1,324 2,534 547 1,484 3,886 6,329
Interest portion of
rental expense 1,597 8,789 10,722 10,480 11,264 11,177
Fixed Charges $13,823 $ 63,410 $ 85,346 $ 87,328 $90,154 $ 92,665
Ratio of earnings to
fixed charges 2.94 1.93 3.84 2.03 1.05 2.27
15