SCHEDULE 14A INFORMATION
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MAYTAG CORPORATION
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FORWARD-LOOKING STATEMENTS
This document includes statements that do not directly or exclusively relate to
historical facts. Such statements are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements speak only as
of this date and include statements regarding anticipated future financial
operating performance and results and expectations as to the closing of the
transaction with Whirlpool. These statements are based on the current
expectations of management of Maytag. There are a number of risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements included in this document. For example, with respect
to the transaction with Whirlpool (1) Maytag may be unable to obtain shareholder
approval required for the transaction; (2) conditions to the closing of the
transaction may not be satisfied or the merger agreement may be terminated prior
to closing; (3) Maytag may be unable to obtain the regulatory approvals required
to close the transaction, or required regulatory approvals may delay the
transaction or result in the imposition of conditions that could have a material
adverse effect on Maytag or cause the parties to abandon the transaction; (4)
Maytag may be unable to achieve cost-cutting goals or it may take longer than
expected to achieve those goals; (5) the transaction may involve unexpected
costs or unexpected liabilities; (6) the credit ratings of Maytag or its
subsidiaries may be different from what the parties expect; (7) the businesses
of Maytag may suffer as a result of uncertainty surrounding the transaction; (8)
the industry may be subject to future regulatory or legislative actions that
could adversely affect Maytag; and (9) Maytag may be adversely affected by other
economic, business, and/or competitive factors. Additional factors that may
affect the future results of Maytag are set forth in its filings with the
Securities and Exchange Commission ("SEC"), which are available at
http://www.maytagcorp.com. Maytag undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
ADDITIONAL INFORMATION RELATING TO THE PROPOSED MERGER AND WHERE TO FIND IT
Whirlpool and Maytag have filed a preliminary prospectus/proxy statement with
the SEC in connection with the proposed transaction. Investors are urged to read
the preliminary prospectus/proxy statement and any other relevant documents
filed or to be filed by Whirlpool or Maytag, including the definitive
prospectus/proxy statement when available, because they contain or will contain
important information. The preliminary prospectus/proxy statement is, and other
documents filed by Whirlpool and Maytag with the SEC are, available free of
charge at the SEC's website (http://www.sec.gov) or from Whirlpool by directing
a request to Whirlpool Corporation, 2000 North M-63, Mail Drop 2800, Benton
Harbor, MI 49022-2692, Attention: Larry Venturelli, Vice President, Investor
Relations. Neither this communication nor the preliminary prospectus/proxy
statement constitutes an offer to sell, or the solicitation of an offer to buy,
Whirlpool common stock in any jurisdiction outside the United States where such
offer or issuance would be prohibited -- such an offer or issuance will only be
made in accordance with the applicable laws of such jurisdiction.
Whirlpool, Maytag and their respective directors, executive officers, and other
employees may be deemed to be participating in the solicitation of proxies from
Maytag stockholders in connection with the approval of the proposed transaction.
Information about Whirlpool's
directors and executive officers is available in Whirlpool's proxy statement,
dated March 18, 2005, for its 2005 annual meeting of stockholders. Information
about Maytag's directors and executive officers is available in Maytag's proxy
statement, dated April 4, 2005, for its 2005 annual meeting of stockholders.
Additional information about the interests of potential participants is included
in the preliminary prospectus/proxy statement Whirlpool and Maytag filed with
the SEC.
# # #
RALPH HAKE CONFERENCE CALL REMARKS - 3Q 2005 EARNINGS ANNOUNCEMENT
OCTOBER 21, 2005
Good Morning. Thank you for joining us today.
This morning, I will provide a few introductory remarks before turning the call
over to George Moore, our CFO, to give you a financial review of our
third-quarter results. Following his comments, I will provide some brief summary
remarks, concluding our conference call.
Our overall financial performance for the third quarter was
disappointing...disappointing, but not discouraging. Let me explain why I feel
as I do.
During the quarter, we grew our top-line sales by 6.5% from year-earlier
figures. Overall, we held our own in share year-over-year and improved
sequentially. Clearly, customer and consumer demand for our brands and products
continues to be strong. Winning in the market is the first necessary step to
recovery; rapidly improving our cost structure is second.
-1-
During the quarter, sourced products, primarily laundry products and top-mount
refrigerators, represented about 20 percent of our major appliance unit sales.
In floor care, over 30 percent of our unit sales came from sourced products.
Sourcing these newest product designs is a strategy that is enabling our growth
and rapid innovation with reduced R&D and capital commitments by Maytag.
While sourcing a portion of our product lines is the right approach to improve
our business over the longer term, as we indicated in our earnings release, it
does not come without some current financial pain. As we increase our product
sourcing volume, we continue to experience substantially lower burden absorption
rates at a few of our manufacturing operations, which significantly hinders our
profitability. I will provide more insight on this specific subject during my
closing remarks.
I will now ask George Moore to provide a detailed look at our financial
performance.
GEORGE. . . FINANCIAL REVIEW
-2-
RALPH CONTINUES. . .
Thank you, George.
Today, as we continue to address our business issues at Maytag, we are currently
working alternative outcomes. First, with our pending merger, we are working to
provide the required information to the U.S. Justice Department so that progress
can be made on a decision regarding the proposed transaction. We still expect
the transaction to close as early as the first quarter of 2006, following
anticipated approval at our shareholders' meeting on December 16, 2005, and the
required regulatory clearance.
The second area of focus, but no less important, is fixing our business. Again,
whether or not Maytag remains an independent company, we must significantly
improve our overall performance to create value for our owners.
To accomplish this, we are working to address our excess manufacturing capacity
issues in our laundry and floor care categories. This fixed cost structure and
under-utilized capacity remain barriers to acceptable financial performance.
-3-
Our excess costs are concentrated in laundry for which we have four plants; and
in floor care, where we have three plants.
In laundry, we took a major step during the quarter as we concentrated
production of vertical-axis washers at our plant in Herrin, Illinois; and dryers
in Searcy, Arkansas. We expect that this will:
o Achieve cost reduction;
o Bring simplicity to our product lines;
o Improve our overall product quality; and
o Improve our plant utilization at these locations.
This is only the first step, however. Our challenge is to replace the products
and revenue stream from our underutilized facilities with improved products at
dramatically lower costs. This involves product redesign, some sourcing and
migration of products from our high-cost laundry and floor care facilities. When
complete, we envision a manufacturing footprint with lower costs, higher
utilization and fewer locations. However, achieving this transition successfully
in two product categories without customer disruption is both a planning and
execution challenge, so we are continuing to work through the necessary details.
When our plans are
-4-
finalized, we will announce the impacts and financial consequences.
Fortunately, when we close the $600 million secured revolving credit facility,
which we expect to do early in the fourth quarter, will meet another
precondition for this initiative, by putting in place the required financing
flexibility to achieve the necessary manufacturing restructuring, while meeting
all of our other cash needs, This, too, will be a big step forward.
While we work through our manufacturing foot print issues, we expect to launch
several new and innovative, high-impact products in the coming quarters. These
new products include significant offerings in the refrigeration, floor care and
dishwasher categories that we expect to have meaningful, positive impact on our
marketplace position.
As the third-quarter results show, we clearly have a lot of difficult work to
do, but I expect that the initiatives we are reviewing will enable us to achieve
a step change in our performance level.
I continue to be encouraged by the tremendous dedication and professionalism
that our employees continue to demonstrate in working through the many
distractions of this present
-5-
environment. I greatly appreciate their ongoing commitment and their resilience
in the face of adversity.
Thank you for your attention on our call today.
Operator...
-6-
GEORGE MOORE CONFERENCE CALL REMARKS - 3Q 2005 EARNINGS ANNOUNCEMENT
OCTOBER 21, 2005
Thank you, Ralph.
Before I begin my comments, I would like to note that our financial statements
and accompanying performance charts may be found on our web site.
Now I would like to provide you with a financial overview of the third quarter
and more insight into our new credit agreement that is expected to close early
in the fourth quarter.
YEAR-OVER-YEAR COMPARISON -- QUARTER
During the third quarter, the industry's Core 5 appliance unit sales grew 3.8
percent, and Maytag's units were up 4.1 percent, with our branded unit sales
increasing 4.6 percent. This follows a second quarter increase in Maytag's unit
sales of 3.1 percent. In both quarters, we outgrew the industry.
In floor care -- defined as upright cleaners and full-size extractors -- the
industry volume was up only six tenths of a percent while our units were up 10.3
percent. Obviously, we gained share.
-1-
Turning to our financials, our consolidated third quarter sales were up 6.5
percent. Sales in the Home Appliances segment increased 6.7 percent, with major
appliances sales up about 9 percent. Floor care sales were declining due to
lower extractor sales and a decline in average selling prices for upright
cleaners.
Home Appliance sales were also positively impacted by double-digit growth in our
Maytag Services operations, which was up 12 percent on a comparative basis.
Maytag International continued to show revenue growth - up 6 percent - versus a
year ago primarily as a result of currency benefits.
As noted, our Commercial Products sales were up 2.5 percent in the segment as a
result of increases in commercial cooking products.
In terms of operating performance, we experienced an operating loss despite $76
million in increased sales. The loss occurred largely as a result of:
o Excess manufacturing capacity in laundry and floor care categories,
which continued to worsen this quarter as the company sells more
sourced products;
-2-
o Higher raw material costs, specifically oil-based resins and steel;
o Increased transportation costs due to fuel prices, which spiked during
the quarter; and
o The decline in average selling prices in floor care.
Our unabsorbed burden costs by far account for the majority of the
year-over-year decline. Although no plans have been finalized or approved, we
continue to examine initiatives that could result in restructuring manufacturing
operations to provide us with a more competitive manufacturing footprint.
During the quarter, SG&A costs were down again as a result of planned reductions
in advertising expenses and cost reduction actions taken in 2004 including a
significant work force reduction.
YEAR-OVER-YEAR COMPARISON -- NINE MONTHS
Comparing the first 9 months of 2005 to the same period in 2004, our sales were
up 2.9 percent with Home Appliances increasing 3.9 percent. International and
Services both continued their sales growth over last year. Commercial Products
sales were down 12 percent year-over-year, primarily due to a continued downturn
in the vending equipment industry.
-3-
On a reported basis, consolidated operating income was approximately $43 million
year to date compared to $47 million for the first nine months of 2005. In 2005,
restructuring and related charges have amounted to $11 million, compared to
restructuring and related charges in 2004 of $55 million. In 2004, we also took
charges for goodwill impairment and front-load washer litigation as well as
recognized a gain on sale of property.
On a comparative basis, excluding these items, year to date operating income has
declined approximately $65 million compared to the prior year. The decrease
resulted from higher material and logistics costs of approximately $120 million
as well as lower, or unfavorable, burden absorption of more than $50 million.
Partially offsetting these items were more than $100 million in benefits from
productivity improvements and restructuring initiatives. These include headcount
reductions, lower national advertising, and savings from the refrigeration
transition.
We have also benefited from higher volume, price and mix in major appliances
along with growth in International and Services which have more than offset the
lower pricing and mix in floor care.
-4-
The operating loss for Commercial Products was $4.5 million in the first nine
months of 2005 compared to an operating loss of $5.7 million in the prior year.
The prior year results included a $9.6 million goodwill impairment charge for
the commercial cooking equipment operations. In the current year, the operating
results of Commercial Products have been adversely impacted by lower sales of
vending equipment, unfavorable product mix, and higher material costs.
SEQUENTIAL COMPARISON -- QUARTER
Sequentially, our consolidated sales were up 2.7 percent. In our Home Appliances
segment, which was up 3 percent, our unit volume increase was greater than the
industry and we grew share overall.
From the second quarter, industry unit sales were up 4.7 percent in the Core 5
categories, and we gained share in our laundry and cooking categories.
In floor care, our unit sales were down 4 percent sequentially; however,
industry unit sales were up 5 percent for uprights and extractors. Industry
average prices were down nearly $10 a unit versus the second quarter.
-5-
In the Commercial Products segment, our sales were down sequentially due to
seasonality in the commercial vending business.
While consolidated sales were up from the second quarter, profitability was
impacted sequentially by higher unabsorbed factory overhead costs, increased
distribution costs, and unfavorable product mix.
OTHER INCOME STATEMENT LINE ITEMS
For items below operating income, let me cover the significant elements.
Interest expense in the third quarter of 2005 increased to $17 million compared
to $15 million in the prior year quarter, as a result of higher interest rates.
Below operating income, we separately broke out the quarterly impact of $8.5
million in net merger-related costs, for legal and investment services. These
expenses include the $40 million termination fee paid to Triton and the
offsetting $40 million reimbursement that we received from Whirlpool.
-6-
In other-net, we realized a $1.5 million loss compared to $4.3 million income in
the prior year. In the prior year, we realized gains on the sale of certain
investments.
The third quarter 2005 tax benefit reflects a year-to-date adjustment for the
change in the full year expected tax rate to 44 percent. This effective tax rate
benefit recognized year to date reflects the favorable impact of income tax
credits, the nontaxable status of the federal reimbursement for retiree drug
costs and the U.S. income tax exclusion for certain export sales. These benefits
are partially offset by the fact that no tax benefit is recognized on net
merger-related costs.
KEY BALANCE SHEET ITEMS
Let's now discuss the following key balance sheet items.
Our overall working capital dollars of $805 million are up $35 million from the
prior year, and increased as a percent of sales from 16 percent to 16.7 percent.
Accounts receivables were up due to the higher sales in the third quarter
compared to the prior year. Inventories are up over the prior year due to higher
inventory levels related to purchased product inventories.
-7-
Improvement in accounts payable were again driven from terms management and
additional sourced product purchases. Of the year to date working capital
increase, we expect to recapture the majority of this increase during the fourth
quarter, as is our typical pattern.
In terms of our cash on hand and debt outstanding, our cash and cash equivalents
of $57 million were approximately the same as the prior year third quarter
balance. Total debt levels of $974 million were down from $996 million in the
prior year. Therefore, our total net debt of $917 million is down $22 million
from the prior year.
During the third quarter of 2005, we signed a commitment letter for a new $600
million, five-year, senior secured revolving credit facility that is fully
underwritten. The new agreement, which is expected to close early in the fourth
quarter, will be secured by certain accounts receivable and inventory. The new
credit facility should provide Maytag with substantially more financial capacity
and flexibility to meet its 2006 debt maturities and its long-term financing
requirements. The commitment letter includes an expansion feature that permits
Maytag to increase the facility by $150 million - to $750 million in total.
-8-
CASH FLOW PERFORMANCE
Our free cash flow, defined as cash flow from operations less capital
expenditures, was a use of cash of $94 million in the first nine months of 2005
compared to a source of $41 million in the prior year. The lower free cash flow
is primarily due to a higher increase in working capital and cash payments for
restructuring and litigation related charges recorded in the prior year but paid
in the current year.
Our nine-month working capital increase was $206 million compared to an increase
in working capital of $174 million in the prior year.
Regarding pension contributions, we made $50 million in voluntary contributions
to our qualified pension plan in the first nine months of 2005 compared to
approximately $90 million in the prior year. We do not expect to make further
contributions in 2005.
Capital expenditures were $65 million in the first nine months of 2005, about
flat with the $67 million invested in 2004. For 2005, we expect capital
expenditures of $80 million to $100 million.
-9-
CLOSING
With that financial overview, I will turn it back over to Ralph.
Ralph...
-10-
MAYTAG WEBSITE SLIDES - 3Q 2005 EARNINGS
The following slide and the slides contained on Exhibit 99.1 attached hereto and
incorporated herein by reference represent slides which have been made available
on Maytag's website, www.maytagcorp.com.
MAYTAG CORPORATION
KEY FINANCIAL STATISTICS FOR THIRD QUARTER AND YEAR TO DATE 2005 (UNAUDITED)
(In thousands except per share data)
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THIRD QUARTER YEAR TO DATE
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--------------- ---------------- ------------- --------------- --------------- -------------
2005 2004 % Change 2005 2004 % Change
--------------- ---------------- ------------- --------------- --------------- -------------
--------------- ---------------- ------------- --------------- --------------- -------------
SALES AND EARNINGS
--------------- ---------------- ------------- --------------- --------------- -------------
Net Sales 1,262,866 1,186,018 6.5% 3,660,423 3,557,190 2.9%
Operating Income (Loss) (582) 16,426 -103.5% 43,179 46,620 -7.4%
Interest Expense (16,794) (14,736) 14.0% (48,847) (40,843) 19.6%
Adverse Judgment on Pre-acquisition - - n/a - (10,505) -100.0%
Distributor Lawsuit
Merger-related Expense (8,468) - n/a (9,516) - n/a
Other Income (Expense) (1,531) 4,326 -135.4% 2,760 7,248 -61.9%
Income Tax Expense (Benefit) (9,205) (1,119) -722.6% (5,467) (2,255) -142.4%
Income (Loss) from Continuing (18,170) 7,135 -354.7% (6,957) 4,775 -245.7%
Operations
Income from discontinued operations, - 339 -100.0% - 339 -100.0%
net of tax
Net Income (Loss) (18,170) 7,474 -343.1% (6,957) 5,114 -236.0%
--------------- ---------------- ------------- --------------- --------------- -------------
Reported Diluted Earnings (Loss) Per $(0.23) $0.09 -341.2% $(0.09) $0.06 -235.0%
Share
--------------- ---------------- ------------- --------------- --------------- -------------
OPERATING EXPENSES
--------------- ---------------- ------------- --------------- --------------- -------------
Cost of Sales 1,145,232 1,028,130 11.4% 3,277,859 3,039,678 7.8%
Gross Profit % 9.3% 13.3% (4.0) pts 10.5% 14.5% (4.0) pts
Selling, General and Administrative 115,799 122,400 -5.4% 328,734 387,883 -15.2%
% of Sales 9.2% 10.3% (1.1) pts 9.0% 10.9% (1.9) pts
Restructuring and Related Charges 2,417 19,062 -87.3% 10,651 54,909 -80.6%
Goodwill Impairment - - n/a - 9,600 -100.0%
Front-load Washer Litigation - - n/a - 18,500 -100.0%
--------------- ---------------- ------------- --------------- --------------- -------------
BUSINESS SEGMENT INFORMATION
--------------- ---------------- ------------- --------------- --------------- -------------
Home Appliances
Net Sales 1,199,075 1,123,801 6.7% 3,475,521 3,346,229 3.9%
Operating Income 39 15,715 -99.8% 47,703 52,319 -8.8%
% of Sales 0.0% 1.4% (1.4) pts 1.4% 1.6% (0.2) pts
--------------- ---------------- ------------- --------------- --------------- -------------
--------------- ---------------- ------------- --------------- --------------- -------------
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THIRD QUARTER YEAR TO DATE
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--------------- ---------------- ------------- --------------- --------------- -------------
2005 2004 % Change 2005 2004 % Change
--------------- ---------------- ------------- --------------- --------------- -------------
--------------- ---------------- ------------- --------------- --------------- -------------
--------------- ---------------- ------------- --------------- --------------- -------------
Commercial Products
Net Sales 63,791 62,217 2.5% 184,902 210,961 -12.4%
Operating Income (Loss) (621) 711 -187.3% (4,524) (5,699) 20.6%
% of Sales -1.0% 1.1% (2.1) pts -2.4% -2.7% 0.3 pts
--------------- ---------------- ------------- --------------- --------------- -------------
Total
Net Sales 1,262,866 1,186,018 6.5% 3,660,423 3,557,190 2.9%
Operating Income (Loss) (582) 16,426 -103.5% 43,179 46,620 -7.4%
Operating Income (Loss) % 0.0% 1.4% (1.4) pts 1.2% 1.3% (0.1) pts
--------------- ---------------- ------------- --------------- --------------- -------------
MISCELLANEOUS
--------------- ---------------- ------------- --------------- --------------- -------------
Average Shares - Basic 79,810 79,116 0.9% 79,813 78,992 1.0%
Average Shares - Diluted 79,810 79,182 0.8% 79,813 79,224 0.7%
GAAP Effective Tax Rate 33.6% -18.6% 52.2 pts 44.0% -89.5% 133.5 pts
--------------- ---------------- ------------- --------------- --------------- -------------
WORKING CAPITAL
--------------- --------------- -------------
Inventories 620,755 572,612 8.4%
Receivables 725,162 670,079 8.2%
Payables 540,400 471,812 14.5%
Net Working Capital 805,517 770,879 4.5%
Working Capital % of Rolling 12 Months 16.7% 16.0% 0.7 pts
Sales
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