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 June 30, 1998
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 August 1, 1998:
Common Stock, $1.25 par value - 91,465,038
Page 1 of 18
MAYTAG CORPORATION
Quarterly Report on Form 10-Q
Quarter Ended June 30, 1998
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....................... 10
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 15
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders....... 16
Item 6. Exhibits and Reports on Form 8-K.......................... 17
Signatures................................................ 18
2
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Condensed Statements of Consolidated Income
Three Months Ended Six Months Ended
June 30 June 30
In thousands except per
share data 1998 1997 1998 1997
Net sales $1,021,699 $ 814,541 $2,062,085 $ 1,607,010
Cost of sales 734,581 590,096 1,471,066 1,173,083
Gross profit 287,118 224,445 591,019 433,927
Selling, general and
administrative expenses 160,967 136,059 329,788 269,041
Operating income 126,151 88,386 261,231 164,886
Interest expense (15,614) (14,431) (31,199) (29,142)
Other - net 1,405 (1,601) 1,733 478
Income before
income taxes and
minority interest 111,942 72,354 231,765 136,222
Income taxes 41,558 27,728 85,690 51,872
Income before
minority interest 70,384 44,626 146,075 84,350
Minority interest (2,397) (843) (5,821) (2,067)
Net income $ 67,987 $ 43,783 $ 140,254 $ 82,283
Basic earnings per
common share:
Net income $ 0.73 $ 0.45 $ 1.50 $ 0.84
Diluted earnings per
common share:
Net income $ 0.71 $ 0.44 $ 1.47 $ 0.83
Dividends per common
share $ 0.16 $ 0.16 $ 0.32 $ 0.32
See notes to condensed consolidated financial statements.
3
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition
June 30 December 31
1998 1997
In thousands except share data
Assets
Current assets
Cash and cash equivalents $ 29,260 $ 27,991
Accounts receivable 590,704 473,741
Inventories 368,360 350,209
Deferred income taxes 46,073 46,073
Other current assets 25,344 36,703
Total current assets 1,059,741 934,717
Noncurrent assets
Deferred income taxes 118,006 118,931
Pension investments 1,471 2,160
Intangible pension asset 33,819 33,819
Other intangibles 427,052 433,595
Other noncurrent assets 45,344 49,660
Total noncurrent assets 625,692 638,165
Property, plant and equipment
Property, plant and equipment 1,856,191 1,816,209
Less allowance for depreciation 929,244 874,937
Total property, plant and equipment 926,947 941,272
Total assets $ 2,612,380 $ 2,514,154
See notes to condensed consolidated financial statements.
4
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition - Continued
June 30 December 31
1998 1997
In thousands except share data
Liabilities and Shareowners' Equity
Current liabilities
Notes payable $ 239,590 $ 112,843
Accounts payable 216,073 221,417
Compensation to employees 62,389 62,758
Accrued liabilities 191,010 161,344
Current maturities of long-term debt 8,314 8,276
Total current liabilities 717,376 566,638
Noncurrent liabilities
Deferred income taxes 15,185 23,666
Long-term debt 545,378 549,524
Postretirement benefits other than
pensions 457,911 454,390
Pension liability 40,883 31,308
Other noncurrent liabilities 123,607 99,096
Total noncurrent liabilities 1,182,964 1,157,984
Minority interest 175,324 173,723
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 452,733 494,646
Retained earnings 652,207 542,118
Cost of Common stock in treasury
(1998--25,086,977 shares;
1997--22,465,256 shares) (655,014) (508,115)
Employee stock plans (46,003) (48,416)
Accumulated other comprehensive income (13,645) (10,862)
Total shareowners' equity 536,716 615,809
Total liabilities and shareowners'
equity $ 2,612,380 $ 2,514,154
See notes to condensed consolidated financial statements.
5
MAYTAG CORPORATION
Condensed Statements of Consolidated Cash Flows
Six Months Ended
June 30
In thousands 1998 1997
Operating activities
Net income $ 140,254 $ 82,283
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest 5,821 2,067
Depreciation and amortization 75,578 66,298
Deferred income taxes (7,271) (4,397)
Changes in working capital items:
Accounts receivable (116,963) (48,446)
Inventories (18,152) (39,264)
Other current assets 4,460 2,600
Other current liabilities 32,348 5,132
Restructuring reserves (1,728) (5,753)
Pension assets and liabilities 10,263 9,114
Postretirement benefits 3,522 4,120
Other--net 30,721 15,519
Net cash provided by operating 158,853 89,273
activities
Investing activities
Capital expenditures (59,388) (106,531)
Total investing activities (59,388) (106,531)
Financing activities
Proceeds from issuance of notes payable 128,365 48,553
Repayment of notes payable (1,615) (993)
Proceeds from issuance of long-term debt 1,104
Repayment of long-term debt (4,107) (10,260)
Stock repurchases (159,115) (11,779)
Forward stock purchase contract amendment (63,782)
Stock options exercised and other Common stock
transactions 30,635 20,025
Dividends (34,384) (31,645)
Investment by joint venture partner 6,900 8,625
Total financing activities (97,103) 23,630
Effect of exchange rates on cash (1,093) (145)
Increase in cash and cash equivalents 1,269 6,227
Cash and cash equivalents at beginning of year 27,991 27,543
Cash and cash equivalents at end of period $ 29,260 $ 33,770
See notes to condensed consolidated financial statements.
6
MAYTAG CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 1998
NOTE A--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 and are of a normal recurring nature. Operating results
for the six month period ended June 30, 1998 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1998.
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, 1997.
NOTE B--INVENTORIES
Inventories consist of the following (in thousands):
June 30 December 31
1998 1997
Raw materials $ 61,379 $ 61,740
Work in process 55,279 53,069
Finished products 245,189 229,450
Supplies 6,513 5,950
$ 368,360 $ 350,209
NOTE C--CONTINGENCIES
On July 7, 1997, a major customer of the Company, Montgomery Ward Holding
Co. ("Montgomery Ward"), filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. At the time of the filing, after adjustments which
should be available in bankruptcy, the Company had accounts receivable due
from Montgomery Ward of approximately $39 million. During the second
quarter of 1998, the Company sold a $15 million participation interest in
the accounts receivable claims for approximately $6 million. While the
Company is unable to predict the ultimate recovery on the remaining
accounts receivable claims, the Company has reserves in the allowance for
doubtful accounts of approximately $13 million for the estimated potential
loss on the remaining accounts receivable claims.
Other contingent liabilities arising in the normal course of business,
including guarantees, repurchase agreements, pending litigation,
environmental remediation and other claims, taxes and other claims, are not
considered to be significant in relation to the Company's consolidated
financial position.
7
NOTE D--INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
Principal financial data by industry segment and different geographic
locations is as follows (in thousands):
Quarter Ended June 30
Net sales 1998 1997
Home appliances
North America $ 860,858 $ 724,569
Asia 30,824 26,255
Commercial appliances 130,017 63,717
Consolidated $ 1,021,699 $ 814,541
Operating income 1998 1997
Home appliances
North America $ 117,059 $ 84,596
Asia 2,103 2,625
Commercial appliances 16,077 7,739
General corporate (9,088) (6,574)
Consolidated $ 126,151 $ 88,386
Six Months Ended June 30
Net sales 1998 1997
Home appliances
North America $ 1,742,844 $ 1,425,729
Asia 81,245 61,708
Commercial appliances 237,996 119,573
Consolidated $ 2,062,085 $ 1,607,010
Operating income 1998 1997
Home appliances
North America $ 244,809 $ 158,103
Asia 6,341 6,149
Commercial appliances 27,961 14,300
General corporate (17,880) (13,666)
Consolidated $ 261,231 $ 164,886
NOTE E--COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted FASB Statement 130, "Reporting
Comprehensive Income," ("SFAS 130"). SFAS 130 establishes new rules for
reporting and display of comprehensive income and its components; however,
the adoption of this Statement had no impact on the Company s net income or
shareowners equity. SFAS 130 requires unrealized gains or losses on the
Company s available-for-sale securities and foreign currency translation
adjustments to be included in other comprehensive income, which prior to
adoption were reported separately in shareowners equity. Prior year
financial statements have been reclassified to conform to the requirements
of SFAS 130.
Total comprehensive income and its components, net of related tax, are as
follows (in thousands):
Quarter Ended June 30 1998 1997
Net income $ 67,987 $ 43,783
Unrealized gain on securities 635
Foreign currency translation adjustments (976) 3
Comprehensive income $ 67,646 $ 43,786
8
Six Months Ended June 30 1998 1997
Net income $ 140,254 $ 82,283
Unrealized loss on securities (1,328)
Foreign currency translation adjustments (1,455) (162)
Comprehensive income $ 137,471 $ 82,121
The components of accumulated other comprehensive income, net of related
tax, at June 30, 1998 and December 31, 1997 are as follows:
1998 1997
Unrealized loss on securities $ (4,933) $ (3,605)
Foreign currency translation adjustments (8,712) (7,257)
Accumulated other comprehensive income $ (13,645) $ (10,862)
NOTE F--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
Three Months Ended Six Months Ended
June 30 June 30
In thousands except per
share data 1998 1997 1998 1997
Numerator for basic and
diluted earnings per
share - net income $ 67,987 $ 43,783 $ 140,254 $ 82,283
Denominator for basic
earnings per share -
weighted average shares 93,116 97,785 93,731 97,700
Effect of dilutive
securities:
Stock option plans 1,753 825 1,700 712
Restricted stock awards 187 215 174 200
Forward stock purchase
contract 129 65
Denominator for diluted
earnings per share -
adjusted weighted average
shares 95,185 98,825 95,670 98,612
Basic earnings per share $ 0.73 $ 0.45 $ 1.50 $ 0.84
Diluted earnings per
share $ 0.71 $ 0.44 $ 1.47 $ 0.83
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
COMPARISON OF 1998 WITH 1997
Net Sales: Consolidated net sales were $1.02 billion in the second quarter
of 1998, an increase of 25 percent compared to the same period in 1997.
Net sales in the second quarter of 1998 included sales of G. S. Blodgett
Corporation ("Blodgett"), a manufacturer of commercial cooking equipment,
which was acquired by the Company on October 1, 1997. Excluding Blodgett,
net sales increased 21 percent from the same period in the prior year. For
the first half of 1998, consolidated net sales increased 28 percent
compared to the prior year. Excluding Blodgett, net sales increased 24
percent from the same period in the prior year.
North American home appliances net sales, which includes major
appliances and floor care products, increased 19 percent in the second
quarter of 1998 compared to 1997. For the first half of 1998, net sales
for North American home appliances increased 22 percent from the same
period in 1997. Net sales were up from the prior year due to the
introduction of new products, including new lines of Maytag Neptune laundry
products, Maytag refrigerators, Maytag cooking products, Hoover upright
vacuum cleaners and Hoover upright deep carpet cleaners. In addition, net
sales were up from the prior year due to the volume associated with
shipments to Sears, Roebuck and Co. in connection with the Company's
agreement to begin selling the full line of Maytag brand major appliances
through most Sears stores in the U.S. beginning in February 1998. The
Company's net sales also benefited from the significant volume growth in
industry shipments of major appliances in the first half of 1998 compared
to the prior year period.
Net sales reported by Rongshida-Maytag, the Company's home appliances
joint venture in China, were up 17 percent in the second quarter of 1998
from the second quarter of 1997. For the first half of 1998, Rongshida-
Maytag net sales increased 32 percent compared to the same period in 1997.
The sales increase was primarily attributable to higher unit volume
partially offset by price reductions implemented on selected models in
response to competitive conditions in China.
Net sales of commercial appliances, which include commercial vending
and cooking, were up 104 percent from the second quarter of 1997.
Excluding Blodgett, net sales increased 48 percent from 1997. For the
first half of 1998, net sales were up 99 percent compared to 1997.
Excluding Blodgett, net sales increased 43 percent from the first half of
1997. This net sales increase was primarily driven by a significant
increase in the sales volume of Dixie-Narco enhanced capacity venders
introduced in 1997.
Gross Profit: Consolidated gross profit as a percent of sales increased to
28.1 percent in the second quarter of 1998 from 27.6 percent in the second
quarter of 1997. For the first half of 1998, consolidated gross profit as
a percent of sales increased to 28.7 percent compared to 27.0 percent in
1997.
North American home appliances gross margins increased due to an
increase in sales volume, favorable brand and product sales mix compared to
the prior year, and the absence of production start-up costs associated
with the Company's new line of top-mount refrigerators which were incurred
in 1997.
Rongshida-Maytag gross margins decreased due primarily from an
increase in research and development costs associated with the new line of
refrigerators. During the second half of 1998, the Company expects
10
Rongshida-Maytag to begin production of a new line of refrigerators for
home use. Refrigerator production start-up costs will adversely the
results of Rongshida-Maytag through the remainder of 1998.
Commercial appliances gross margins increased due to the operating
leverage obtained from the increase in sales volume, partially offset by
inefficiencies from the reorganization of manufacturing operations at
Blodgett.
The Company expects raw material prices in 1998 to be approximately
the same to slightly lower than 1997 levels.
Selling, General and Administrative Expenses: Consolidated selling,
general and administrative expense spending increased primarily due to an
increase in advertising and promotion costs related to the increase in net
sales. However, selling, general and administrative expenses were 15.8
percent of sales in the second quarter of 1998 compared to 16.7 percent of
sales in the same period in 1997. For the first half of 1998, consolidated
selling, general and administrative expenses were 16.0 percent of sales
compared to 16.7 percent in 1997. The decrease as a percent of sales was
driven by the operating leverage obtained on fixed expenses with the
increase in net sales in the second quarter and first half of 1998.
Operating Income: Consolidated operating income for the second quarter of
1998 increased 43 percent to $126 million, or 12.3 percent of sales,
compared to $88 million, or 10.9 percent of sales in the same period in
1997. For the first half of 1998, consolidated operating income increased
58 percent to $261 million, or 12.7 percent of sales, compared to $165
million, or 10.3 percent of sales in 1997.
North American home appliances operating income increased 38 percent
in the second quarter of 1998 compared to 1997. Operating margin for the
second quarter of 1998 was 13.6 percent of sales compared to 11.7 percent
of sales in 1997. For the first half of 1998, operating income increased
55 percent compared to 1997. Operating margin for the first half of 1998
was 14.0 percent of sales compared to 11.1 percent of sales in 1997. The
increase in operating margins was primarily due to the increase in gross
profit margins discussed above.
Rongshida-Maytag operating income decreased 20 percent in the second
quarter of 1998 compared to 1997. Operating margin for the second quarter
of 1998 was 6.8 percent of sales compared to 10.0 percent of sales in 1997.
For the first half of 1998, operating income increased 3 percent compared
to 1997. Operating margin for the first half of 1998 was 7.8 percent of
sales compared to 10.0 percent of sales in 1997. The decrease in operating
margins was primarily due to the decrease in gross profit margins discussed
above.
Commercial appliances operating income, which includes Blodgett in the
current year, increased 108 percent in the second quarter of 1998 compared
to 1997. Operating margin for the second quarter of 1998 was 12.4 percent
of sales compared to 12.1 percent of sales in 1997. For the first half of
1998, operating income increased 96 percent compared to the same period in
1997. Operating margin for the first half of 1998 was 11.7 percent of sales
compared to 12.0 percent of sales in 1997. The decrease in operating
margin was due to manufacturing inefficiencies at Blodgett discussed above.
Interest Expense: Interest expense increased 8 percent and 7 percent from
the second quarter and first half of 1997, respectively, due to an increase
in short-term borrowings and lower capitalized interest.
11
Income Taxes: The effective tax rate for the second quarter of 1998 was
37.1 percent compared to 38.3 percent in 1997. The effective tax rate for
the first half of 1998 was 37.0 percent compared to 38.1 percent in 1997.
The decrease in the effective tax rate was primarily due to savings from
certain tax initiatives undertaken by the Company.
Net Income: Net income for the second quarter of 1998 was $68 million, an
increase of 55 percent, compared to net income of $44 million in 1997. For
the first half of 1998, net income increased 71 percent to $140 million
compared to $82 million in 1997. The increase in net income was primarily
due to the increase in operating income.
Basic earnings per share increased 62 percent to $0.73 per share in
the second quarter of 1998 compared to $0.45 per share in the second
quarter of 1997. On a diluted basis, earnings per share increased 61
percent to $0.71 per share in the second quarter of 1998 compared to $0.44
per share in 1997. Basic earnings per share increased 79 percent to $1.50
per share in the first half of 1998 compared to $0.84 per share in the
first half of 1997. On a diluted basis, earnings per share increased 77
percent to $1.47 per share in the first half of 1998 compared to $0.83 per
share in 1997. The increase in basic and diluted earnings per share was
due to the increase in net income and the effect of the Company'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
The Company's primary sources of liquidity are cash provided by operating
activities and borrowings. Detailed information on the Company's cash
flows is presented in the Statements of Condensed Consolidated Cash Flows.
Net Cash Provided by Operating Activities: Cash flow provided by operating
activities primarily consists of net income adjusted for certain non-cash
items, changes in working capital items, changes in pension assets and
liabilities, and changes in the liability for postretirement benefits.
Non-cash items include depreciation and amortization and deferred income
taxes. Working capital items consists primarily of accounts receivable,
inventories, other current assets and other current liabilities.
Net cash provided by operating activities in the first half of 1998
increased from 1997 as a result of an increase in net income partially
offset by an increase in working capital.
A portion of the Company's accounts receivable is concentrated among
major national retailers, including Montgomery Ward. (See discussion of
Montgomery Ward and the allowance for doubtful accounts in "NOTE C--
CONTINGENCIES" section of the Notes to Condensed Consolidated Financial
Statements.) A significant loss of business with any of these national
retailers could have an adverse impact on the Company's ongoing operations.
Total Investing Activities: The Company continually invests in its
businesses for new product designs, cost reduction programs, replacement of
equipment, capacity expansion and government mandated product requirements.
Capital expenditures in the first half of 1998 were $59 million
compared to $107 million in the same period in 1997. The lower capital
spending was due to the completion of several major capital projects in
1997. For 1998, the Company plans to invest approximately $160 million in
capital expenditures, including those for Rongshida-Maytag.
12
Total Financing Activities: Dividend payments on the Company's common
stock in the first half of 1998 were $30.2 million, or $.32 per share,
compared to $31.4 million, or $.32 per share in 1997.
In 1997, the Company's board of directors authorized the repurchase of
up to 15 million additional shares beyond the previous share repurchase
authorizations of 5 million shares and 10.8 million shares. Under these
authorizations, the Company has repurchased 19.6 million shares at a cost
of $548 million. During the first half of 1998, the Company repurchased
3.1 million shares at a cost of $159 million. In the month of July, the
Company repurchased an additional 0.7 million shares at a cost of $32
million. The Company plans to continue the repurchase of shares over a
non-specified period of time.
During the first quarter of 1998, the Company amended the forward
stock purchase agreement associated with the repurchase of four million
shares by the Company during 1997. The future contingent purchase price
adjustment included in the forward stock purchase agreement was amended to
provide for settlement based on the difference in the market price of the
Company's common stock at the time of settlement compared to the market
price of the Company's common stock as of March 24, 1998 rather than as of
August 20, 1997. The net cost of the amendment was $64 million. The
forward stock purchase contract allows the Company to determine the method
of settlement. The Company's objective in this transaction is to reduce
the average price of repurchased shares.
In connection with the share repurchase program, the Company sells
options which give the purchaser the right to sell shares of the Company's
common stock to the Company at specified prices upon exercise of the
options. The put option contracts allow the Company to determine the
method of settlement. The Company's objective in selling put options is to
reduce the average price of repurchased shares. In the first half of 1998,
the Company received $17 million in premium proceeds from the sale of put
options. As of June 30, 1998, there were 4 million put options outstanding
with strike prices ranging from $28.75 to $52.39 (the weighted-average
strike price was $46.82).
Any funding requirements for future investing and financing activities
in excess of cash on hand and generated from operations are planned to be
supplemented by 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
June 29, 2001 and includes covenants for interest coverage and leverage
which the Company was in compliance with at June 30, 1998. The Company
also maintains the ability to issue an aggregate of $125 million in medium-
term note securities under an effective shelf registration statement filed
with the Securities and Exchange Commission.
Market Risks
The Company is subject to market risk, including changes in interest rates
and foreign currency exchange rates. The Company manages market risks
through the use of a variety of financial and derivative financial
instruments. The Company's objective in managing these risks is to reduce
fluctuations in earnings and cash flows associated with changes in interest
rates and foreign currency rates. The Company manages its exposure to
interest rate risk through the proportion of fixed rate and variable rate
debt in its total debt portfolio. The Company uses foreign currency
forward and option contracts to hedge the U.S. dollar value resulting from
anticipated foreign currency transactions.
There have been no material changes in the reported market risks of
the Company since December 31, 1997. See further discussion of these
13
market risks and related financial instruments in the Maytag Corporation
annual report on Form 10-K for the year ended December 31, 1997.
Year 2000
The much publicized "Year 2000 problem" arises because many existing
computer programs use only the last two digits to refer to a year.
Therefore, these computer programs do not properly recognize a year that
begins with "20" instead of the familiar "19." If not corrected, these
computer applications could fail or create erroneous results. The global
extent of the potential impact of the Year 2000 problem is not yet known,
and if not timely corrected, it could affect the economy and the Company.
The Company uses computer information systems and manufacturing equipment
which may be affected. It also relies on suppliers and customers who are
also dependent on systems and equipment which use date dependent software.
In 1996 the Company began its effort for the conversion or replacement
of North American computer information systems which did not properly
address the Year 2000. This effort involved both plans for creating
replacement systems for those computer information systems which were
developed internally as well as obtaining versions of software purchased
from third parties which are Year 2000 ready. The Company expects to have
substantially converted or replaced computer information systems for its
North American business operations by the end of 1998 except that the
conversion effort is not expected to be completed until sometime in 1999
for Blodgett, which was acquired by the Company in the fourth quarter of
1997.
In 1997 the Company began to review the production equipment used in
manufacture of its products in the Company s North American operations as
well as the systems related to the infrastructure of the North American
manufacturing and office facilities. The Company is continuing to
inventory and verify Year 2000 readiness of computer controlled
manufacturing equipment and computer controls for the North American
manufacturing and office facilities. This effort is approximately 50
percent complete and requires validation of equipment from the equipment
manufacturer.
In 1997 the Company also began to assess the Year 2000 problem
remediation efforts of North American suppliers, including providers of
services such as utilities, and customers where there is a significant
business relationship; however there is no assurance that the Company will
not be affected by the Year 2000 problems of other organizations.
Rongshida-Maytag is currently initiating a review of the implications
of the Year 2000 problem on computer information systems and equipment used
in the manufacture of its products or facilities. The remediation effort
required for the computer information systems and equipment for Rongshida-
Maytag has not yet been identified.
The costs associated with the Company's Year 2000 remediation are
being expensed as incurred; and are not material to the performance of the
Company for previous periods and are not expected to be material relative
to the future performance of the Company. As previously identified, the
Company utilizes software which was acquired from third parties. The
Company has maintenance agreements with certain of its software vendors
which in return for annual contractual payments enable it to obtain new
software releases, including versions which are now Year 2000 ready.
If the Company is unsuccessful or if the remediation efforts of its
key suppliers or customers are unsuccessful with regard to Year 2000
remediation, there may be a material adverse impact on the Company's
consolidated results and financial condition. The Company s contingency
plan is currently limited to such precautionary measures as an anticipated
14
increased level of finished goods and raw materials to minimize the
potential disruption in the Company s ability to manufacture and distribute
products. However, the Company is unable to quantify any potential adverse
impact at this time, but will continue to monitor and evaluate the
situation.
Contingencies
The Company 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 "NOTE C--CONTINGENCIES"
section of the Notes to Condensed 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 terms such as "expects,"
"intends," "plans" or "should." 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 the Company competes, including changes in economic
conditions in the geographic areas where the Company's operations exist or
products are sold; timing and start-up 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 ability of the Company and customers
and suppliers to become Year 2000 ready in a timely manner; the cost and
availability of raw materials and purchased components; 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.
15
MAYTAG CORPORATION
Submission of Matters to a Vote of Security Holders
June 30, 1998
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 May 14, 1998.
(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 2001 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, Fred G. Steingraber. The Inspectors of
Election certified the following vote tabulations:
FOR WITHHELD NON-VOTES
Wayland R. Hicks 82,254,313 1,326,079 0
W. Ann Reynolds 82,354,162 1,226,230 0
John A. Sivright 81,481,893 2,098,500 0
Fred G. Steingraber 82,400,320 1,180,073 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 1998 was approved by the
shareholders. The Inspectors of Election certified the
following vote tabulations:
FOR AGAINST ABSTAIN NON-VOTES
83,163,589 273,456 143,347 0
3. A proposal to adopt the Maytag Corporation 1998 Non-Employee
Directors' Stock Option Plan:
FOR AGAINST ABSTAIN NON-VOTES
75,346,266 6,370,453 1,713,966 0
4. A proposal from a shareholder to elect the entire Board of
Directors each year with an independent lead director and future
change in the frequency of election of directors be submitted to
shareholder vote as a stand-alone issue and this resolution
applies to successor company(s).
FOR AGAINST ABSTAIN NON-VOTES
27,692,815 44,471,134 1,520,504 9,896,354
16
MAYTAG CORPORATION
Exhibits and Reports on Form 8-K
June 30, 1998
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27(a) Financial Data Schedule - Six Months Ended June 30, 1998
27(b) Restated Financial Data Schedule - Six Months Ended June 30,
1997
(b) Reports on Form 8-K
The Company filed a Form 8-K dated August 6, 1998 under Item 5, Other
Events, indicating it expects to repurchase more of its common stock
in 1998 than originally planned given the cash flow strength being
generated by record sales and earnings.
17
MAYTAG CORPORATION
Signatures
June 30, 1998
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 G.J. Pribanic
Date: August 12, 1998 ____________________
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
18