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 March 31, 2002
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: 641-792-7000
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 March 31, 2002:
Common Stock, $1.25 par value - 77,543,140
1
MAYTAG CORPORATION
Quarterly Report on Form 10-Q
Quarter Ended March 31, 2002
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income ................................................... 3
Consolidated Balance Sheets ......................................................... 4
Consolidated Statements of Cash Flows ............................................... 6
Notes to Consolidated Financial Statements .......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk .......................... 17
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................................... 18
Signatures .......................................................................... 19
2
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Consolidated Statements of Income
Three Months Ended
March 31
--------------------------
In thousands, except per share data 2002 2001
- ----------------------------------------------------------------------------------------------------------
Net sales $ 1,177,643 $ 978,417
Cost of sales 918,213 759,737
----------- -----------
Gross profit 259,430 218,680
Selling, general and administrative expenses 152,191 141,628
----------- -----------
Operating income 107,239 77,052
Interest expense (17,406) (15,302)
Other - net 996 899
----------- -----------
Income from continuing operations before income taxes and minority interest 90,828 62,649
Income taxes (benefit) 30,881 (21,140)
----------- ------------
Income from continuing operations before minority interest 59,947 83,789
Minority interest (1,866) (5,204)
----------- -----------
Income from continuing operations 58,081 78,585
Discontinued operations:
Loss from discontinued operations (1,317) (2,378)
Income tax (benefit) on discontinued operations -- (71)
----------- -----------
Loss from discontinued operations (1,317) (2,307)
Net income $ 56,764 $ 76,278
=========== ===========
Basic earnings (loss) per common share:
- ----------------------------------------------------------------------------------------------------------
Income from continuing operations $ 0.75 $ 1.03
Discontinued operations (0.02) (0.03)
Net income $ 0.74 $ 1.00
Diluted earnings (loss) per common share:
- ----------------------------------------------------------------------------------------------------------
Income from continuing operations $ 0.75 $ 0.99
Discontinued operations (0.02) (0.03)
Net income $ 0.73 $ 0.96
See notes to consolidated financial statements.
3
MAYTAG CORPORATION
Consolidated Balance Sheets
March 31 December 31
In thousands, except share data 2002 2001
- --------------------------------------------------------------------------------
Assets
Current assets
- --------------------------------------------------------------------------------
Cash and cash equivalents $ 33,878 $ 109,370
Accounts receivable-net 669,302 618,101
Inventories 493,453 447,866
Deferred income taxes 63,647 63,557
Other current assets 37,919 40,750
Discontinued current assets 81,616 89,900
---------- ----------
Total current assets 1,379,815 1,369,544
Noncurrent assets
- --------------------------------------------------------------------------------
Deferred income taxes 221,967 227,967
Prepaid pension cost 1,511 1,532
Intangible pension asset 101,915 101,915
Goodwill 259,376 259,376
Other intangibles 37,203 37,533
Other noncurrent assets 59,234 62,548
Discontinued noncurrent assets 60,939 60,001
---------- ----------
Total noncurrent assets 742,145 750,872
Property, plant and equipment
- --------------------------------------------------------------------------------
Property, plant and equipment 2,373,861 2,332,082
Less accumulated depreciation 1,326,787 1,296,347
---------- ----------
Total property, plant and equipment 1,047,074 1,035,735
---------- ----------
Total assets $3,169,034 $3,156,151
========== ==========
See notes to consolidated financial statements.
4
MAYTAG CORPORATION
Consolidated Balance Sheets-Continued
March 31 December 31
In thousands, except share data 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareowners' Equity
Current liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Notes payable $ 83,968 $ 148,247
Accounts payable 317,434 316,050
Compensation to employees 71,234 78,281
Accrued liabilities 322,996 285,627
Current portion of long-term debt 283,537 133,586
Discontinued current liability 106,881 112,702
-----------------------------------------------------------
Total current liabilities 1,186,050 1,074,493
Noncurrent liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 26,333 25,100
Long-term debt, less current portion 774,001 932,065
Postretirement benefit liability 502,255 497,182
Accrued pension cost 336,058 352,861
Other noncurrent liabilities 130,996 128,084
Discontinued noncurrent liability 21,817 22,678
-----------------------------------------------------------
Total noncurrent liabilities 1,791,460 1,957,970
Minority interest 100,149 100,142
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 443,321 450,683
Retained earnings 1,206,925 1,164,021
Cost of common stock in treasury (2002--39,607,453 shares;
2001--40,286,575 shares) (1,501,675) (1,527,777)
Employee stock plans (17,650) (23,522)
Accumulated other comprehensive income (185,984) (186,297)
-----------------------------------------------------------
Total shareowners' equity 91,375 23,546
-----------------------------------------------------------
Total liabilities and shareowners' equity $ 3,169,034 $ 3,156,151
===========================================================
See notes to consolidated financial statements.
5
Maytag Corporation
Consolidated Statements of Cash Flows
Three Months Ended
March 31
---------------------
In thousands 2002 2001
- ------------------------------------------------------------------------------------
Operating activities
- ------------------------------------------------------------------------------------
Net income $ 56,764 $ 76,278
Adjustments to reconcile net income to
net cash provided by continuing operating activities:
Net loss from discontinued operations 1,317 2,307
Minority interests 1,866 5,204
Depreciation 38,369 34,569
Amortization 298 2,561
Deferred income taxes 7,143 (23,649)
Special charges, net of cash paid (2,497) (6,343)
Changes in working capital items
exclusive of business acquisitions:
Accounts receivable (51,201) (93,746)
Inventories (45,587) (3,146)
Other current assets 2,831 23,323
Other current liabilities 48,558 31,604
Pension assets and liabilities (16,782) 9,212
Postretirement benefit liability 5,073 3,506
Other - net 2,286 4,354
---------------------
Net cash provided by continuing operating activities 48,438 66,034
Investing activities
- ------------------------------------------------------------------------------------
Capital expenditures (50,439) (30,082)
---------------------
Investing activities-continuing operations (50,439) (30,082)
Financing activities
- ------------------------------------------------------------------------------------
Net proceeds (repayment) of notes payable (64,279) 20,033
Repayment of long-term debt (3,668) (3,618)
Stock repurchases -- (27,672)
Stock options exercised and other common stock transactions 12,120 2,096
Dividends on common stock (13,863) (13,713)
Dividends on minority interests (3,718) (5,190)
Cash from (to) discontinued operations (645) (5,234)
---------------------
Financing activities-continuing operations (74,053) (33,298)
Effect of exchange rates on cash 562 (631)
---------------------
Increase (decrease) in cash and cash equivalents (75,492) 2,023
Cash and cash equivalents at beginning of year 109,370 6,073
---------------------
Cash and cash equivalents at end of year $ 33,878 $ 8,096
=====================
Cash flows from discontinued operations
- ------------------------------------------------------------------------------------
Net cash used by discontinued operating activities $ (4,670) $ (8,388)
Investing activities-discontinued operations (938) (1,082)
Financing activities-discontinued operations 650 1,551
---------------------
Decrease in cash-discontinued operations $ (4,958) $ (7,919)
=====================
See notes to consolidated financial statements.
6
MAYTAG CORPORATION
Notes to Consolidated Financial Statements
March 31, 2002
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited 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, 2002 are not necessarily indicative of the
results that are expected for the year ending December 31, 2002. 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, 2001.
NOTE B - COMPREHENSIVE INCOME
Total comprehensive income and its components, net of related tax are as follows
(in thousands):
Three months ended March 31 2002 2001
-------------------------------------------------------------------------------
Net income $56,764 $76,278
Other comprehensive income (loss) items,
net of income taxes
Unrealized losses on securities (525) (212)
Unrealized gains on hedges 267 -
Foreign currency translation 571 (945)
------- -------
Total other comprehensive income (loss) 313 (1,157)
------- -------
Comprehensive income $57,077 $75,121
======= =======
The components of accumulated other comprehensive loss, net of related tax are
as follows:
March 31 December 31
In thousands 2002 2001
- --------------------------------------------------------------------------------
Minimum pension liability adjustment $(178,082) $(178,082)
Unrealized gains on securities 748 1,273
Unrealized gains on hedges 1,211 944
Foreign currency translation (9,861) (10,432)
--------- ---------
Accumulated other comprehensive loss $(185,984) $(186,297)
========= =========
7
NOTE C--INVENTORIES
Inventories consisted of the following:
March 31 December 31
In thousands 2002 2001
- ------------------------------------------------------------------------------------
Raw materials $ 59,223 $ 62,587
Work in process 50,613 76,524
Finished goods 449,471 382,925
Supplies 17,994 9,659
-------- --------
Total FIFO cost 577,301 531,695
Less excess of FIFO cost over LIFO 83,848 83,829
-------- --------
Inventories $493,453 $447,866
======== ========
NOTE D--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
March 31
--------------------
In thousands except per share data 2002 2001
- ------------------------------------------------------------------------------------
Numerator for basic and diluted earnings per share-
income from continuing operations $ 58,081 $ 78,585
======== ========
Numerator for basic and diluted earnings per share-
discontinued operations $ (1,317) $ (2,307)
======== ========
Numerator for basic and diluted earnings per share-net income $ 56,764 $ 76,278
======== ========
Denominator for basic earnings per share
- weighted-average shares 77,004 76,205
Effect of dilutive securities:
Stock option plans 936 884
Put options -- 2,151
-------- --------
Potential dilutive common shares 936 3,035
-------- --------
Denominator for diluted earnings per share
- adjusted weighted-average shares 77,940 79,240
======== ========
NOTE E--CONTINGENCIES
Maytag has contingent liabilities arising in the normal course of business,
including: guarantees, repurchase agreements, pending litigation, environmental
remediation, taxes and other claims which are not considered to be significant
in relation to Maytag's consolidated financial position.
8
NOTE F--SEGMENT REPORTING
Maytag has two reportable segments: home and commercial appliances. Maytag's
home appliances segment manufactures and sells major appliances (laundry
products, dishwashers, refrigerators, cooking appliances) and floor care
products. These products are sold primarily to major national retailers and
independent retail dealers in North America and targeted international markets.
Maytag's commercial appliances segment manufactures and sells commercial cooking
and vending equipment. These products are sold primarily to distributors, soft
drink bottlers, restaurant chains and dealers in North America and targeted
international markets.
Maytag's reportable segments are distinguished by the nature of products
manufactured and sold and types of customers.
Financial information for Maytag's reportable segments consisted of the
following:
Three Months Ended
March 31
-------------------------------------
In thousands 2002 2001
- --------------------------------------------------------------------------------------------------------------------
Net sales
Home appliances $ 1,119,236 $ 913,755
Commercial appliances 58,407 64,662
-------------------------------------
Consolidated total $ 1,177,643 $ 978,417
=====================================
Operating income
Home appliances $ 118,959 $ 84,989
Commercial appliances 1,344 2,934
-------------------------------------
Total for reportable segments 120,303 87,923
Corporate (13,064) (10,871)
-------------------------------------
Consolidated total $ 107,239 $ 77,052
=====================================
9
The reconciliation of segment profit to consolidated income from continuing
operations before income taxes and minority interest consisted of the following:
Three Months Ended
March 31
---------------------------------
In thousands 2002 2001
- ----------------------------------------------------------------------------------------------
Total operating income for reportable segments $ 120,303 $ 87,923
Corporate (13,064) (10,871)
Interest expense (17,407) (15,302)
Other - net 996 899
---------- ----------
Income from continuing operations before income
taxes and minority interest $ 90,828 $ 62,649
========== ==========
Asset information for Maytag's reportable segments consisted of the following:
March 31 December 31
In thousands 2002 2001
- ----------------------------------------------------------------------------------------------
Total assets
Home appliances $2,345,370 $2,264,575
Commercial appliances 114,936 103,034
---------- ----------
Total for reportable segments 2,460,306 2,367,609
Corporate 566,173 638,641
Discontinued operations 142,555 149,901
---------- ----------
Consolidated total $3,169,034 $3,156,151
========== ==========
NOTE G--MINORITY INTEREST
The income attributable to the noncontrolling interest reflected in Minority
interest in the Consolidated Statements of Income consisted of the following:
Three Months Ended
March 31
---------------------------------
In thousands 2002 2001
- ----------------------------------------------------------------------------------------------
Maytag Trusts $ - $ (3,326)
Anvil Technologies LLC (1,866) (1,878)
---------- ----------
Minority interest $ (1,866) $ (5,204)
The outside investor's noncontrolling interest reflected in Minority interest in
the Consolidated Balance Sheets consisted of the following:
March 31 December 31
In thousands 2002 2001
- ----------------------------------------------------------------------------------------------
Anvil Technologies LLC $ 100,149 $ 100,142
========== ==========
10
NOTE H - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
142, "Goodwill and Other Intangible Assets," effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives are no longer amortized but subject to
annual impairment tests in accordance with the Statement. During the first
quarter of 2002, Maytag performed the first of the required impairment tests of
goodwill as of January 1, 2002 and determined that no adjustment was necessary
to the carrying value of goodwill. Maytag currently has no intangible assets
with indefinite lives.
Maytag applied the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. The following table discloses pro
forma results for net income and earnings per share as if SFAS 142 were adopted
at the beginning of the periods presented:
March 31 March 31
In thousands except per share data 2002 2001
- --------------------------------------------------------------------------------
Reported net income $56,764 $76,278
Add back: Goodwill amortization -- 2,485
------- -------
Adjusted net income $56,764 78,763
======= =======
Basic earnings per share:
Reported net income $ 0.74 $ 1.00
Goodwill amortization -- 0.03
------- -------
Adjusted net income $ 0.74 $ 1.03
======= =======
Diluted earnings per share:
Reported net income $ 0.73 $ 0.96
Goodwill amortization -- 0.03
------- -------
Adjusted net income $ 0.73 $ 0.99
======= =======
11
Goodwill and other intangibles consist of the following:
March 31 December 31
In thousands except per share data 2002 2001
- ------------------------------------------------------------------------------
Gross goodwill $ 379,929 $ 379,929
Accumulated amortization (120,553) (120,553)
--------- ---------
Net goodwill $ 259,376 $ 259,376
========= =========
Gross other intangibles--amortized
Trademarks $ 35,000 $ 35,000
Other 5,273 5,305
Accumulated amortization (3,070) (2,772)
--------- ---------
Net other intangibles $ 37,203 $ 37,533
========= =========
As of March 31, 2002, Maytag had net goodwill of $245.3 million and $14.1
million reflected in its home and commercial appliances reportable segments,
respectively. Estimated amortization expense for other intangibles will be
approximately $1.2 million for each of the next five years.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," effective for fiscal years beginning after December 15, 2001
that Maytag early adopted in the fourth quarter of 2001. It established a single
accounting method for long-lived assets to be disposed of, including those that
are part of discontinued operations, and broadened the presentation requirements
of discontinued operations to include components of an entity disposed of rather
than a segment of a business. Maytag classified its 50.5 percent owned joint
venture in China ("Rongshida-Maytag") as discontinued operations. All prior
periods presented have been reclassified to reflect these results and the
Blodgett foodservice operations sold in December 2001 as discontinued
operations. Previously, Blodgett was included in the commercial appliances
segment and the international segment consisted solely of Rongshida-Maytag.
In November 2001, the FASB's Emerging Issues Task Force (EITF) reached consensus
on Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a Customer
or a Reseller of the Vendor's Products." This guidance was effective for periods
beginning after December 15, 2001. EITF 01-9 requires companies to classify
certain sales incentive offers as a reduction to sales that were previously
classified in selling, general and administrative expense. Maytag applied the
new rules beginning in the first quarter of 2002 and all prior periods presented
were restated, as required. There was no impact on Maytag's operating income or
net income as a result of the new accounting policy.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Comparison of 2002 with 2001
Maytag Corporation ("Maytag") has two reportable segments: home and commercial
appliances. (See discussion and financial information about Maytag's reportable
segments in "Note F - Segment Reporting" section of the Notes to Consolidated
Financial Statements.)
Maytag adopted a new accounting standard in the first quarter of 2002 that
requires certain sales incentives previously recognized in selling, general and
administrative expenses to be classified as a reduction to sales. EITF 01-9
states that any cash consideration Maytag may give to its customers that has no
identifiable benefit to Maytag other than to increase sales is required to be
classified as a reduction to sales. This reclassification does not change the
total of previously reported operating income or net income from continuing
operations, however the reduction does impact the gross profit and operating
income margins. The reclassified amount was $37.9 million in the first quarter
of 2002 compared to $30.4 million for the first quarter of 2001. Prior periods
have been restated.
Net Sales: Consolidated net sales were $1.178 billion in the first quarter of
2002, an increase of 20 percent compared to the same period in 2001.
Home appliances net sales, which include major appliances, floor care
products and international export sales, were 23 percent higher in the first
quarter of 2002 compared to the same period in 2001. The net sales increase
reflects the impact of the Amana acquisition on August 1, 2001 and record first
quarter U.S. industry shipments of major appliances. The increase in major
appliances net sales was partially offset by sales decreases in floor care
products. The sales decrease in floor products reflected primarily the
bankruptcy filing by a major national retailer in January, 2002 and retailer
focus on lower price points. Maytag expects the major appliance industry to grow
2 to 3 percent for the full year 2002 compared to 2001 and expects modest
floorcare industry unit growth.
Commercial appliances net sales, which include vending and food service,
decreased 10 percent in the first quarter of 2002 compared to the same period in
2001. The deterioration in year-over-year performance is largely attributable to
the decline in sales of vending products. Maytag expects the vending equipment
industry to be flat relative to 2001.
Gross Profit: Consolidated gross profit as a percent of sales decreased to 22
percent in the first quarter of 2002 from 22.4 percent of sales in the same
period in 2001. The decrease in gross margin was due to sales of lower margin
Amana products and an increase in investment in research and development,
partially offset by improved product mix and lower material costs. While the
recent steel tariff announcements have not yet impacted raw material and
component part prices, Maytag is unable to assess what impact this might have on
the cost of materials purchased during the remainder of 2002 and subsequent
periods.
Selling, General and Administrative Expenses: Consolidated selling, general and
administrative expenses were 12.9 percent of sales in the first quarter of 2002
compared to 14.5 percent of sales in the same period in 2001. This decrease was
due to an increase in sales and a corporate-wide cost reduction initiative as
well as a change in accounting standards, effective January 1, 2002, whereby
goodwill and intangible assets deemed to have indefinite lives will no longer be
amortized but subject to annual impairment tests. These results were achieved
despite investing 8 percent more in national advertising in the current quarter
as compared to last year. Maytag expects the cost reduction initiative to
continue to have favorable results compared to 2001.
Operating Income: Consolidated operating income for the first quarter of 2002
increased 39 percent to $107.2 million, or 9.1 percent of sales, compared to
$77.1 million, or 7.9 percent of sales, in the same period in 2001. The increase
in operating margin was due to decreased selling, general and administrative
expenses
13
as a percent of sales, partially offset by the decrease in gross margin as a
percent of sales, both discussed above.
Home appliances operating income increased 40 percent in the first quarter
of 2002 compared to 2001. Operating margin for the first quarter of 2002 was
10.6 percent of sales compared to 9.3 percent of sales in the same period in
2001. The increase in operating margin was due to the decreased selling, general
and administrative expenses as a percent of sales, partially offset by the
decrease in gross margin as a percent of sales, both discussed above.
Commercial appliances operating income decreased 54 percent in the first
quarter of 2002 compared to the same period in 2001. Operating margin for the
first quarter of 2002 was 2.3 percent of sales compared to 4.5 percent of sales
in the same period in 2001. The decreases in operating margin for the first
quarter were due primarily to the decline in net sales discussed above.
Interest Expense: Interest expense for the first quarter of 2002 was 14 percent
higher than for the prior year primarily due to the additional debt issued for
the acquisition of Amana, partially offset by lower average interest rates.
Income Taxes: The effective tax rate for the first quarter of 2002 was 34.0
percent compared to an effective tax rate for the same period in 2001, excluding
a $42 million one-time tax benefit associated with an Internal Revenue Service
audit settlement, of 33.3 percent. Maytag expects the effective tax rate for the
remainder of 2002 to be approximately 34 percent.
Minority Interest: Minority interest was down $3.3 million from the first
quarter of 2001 primarily due to the retirement of the Maytag Capital Trusts
during the third quarter of 2001.
Discontinued Operations: Maytag completed the sale of its Blodgett foodservice
operations in December 2001 and continues efforts to dispose of its interest in
the 50.5 percent owned joint venture in China ("Rongshida-Maytag") during 2002.
The operations of Rongshida-Maytag have been reflected as discontinued
operations and prior year financial statements have been restated to reflect
Blodgett and Rongshida-Maytag as discontinued operations.
Net Income: The following tables summarize the impact of the one-time tax
benefit and discontinued operations on reported net income and diluted earnings
per share. Comparative net income for the first quarter of 2002 increased 59
percent to $58 million from net income of $37 million in the first quarter of
2001 primarily due to the increase in operating income described above. The
increase in comparative diluted earnings per share in the first quarter of 2002
compared to the same periods in 2001 was due primarily to the increase in
operating income.
14
Three months ended
March 31,
------------------
Net income (in millions) 2002 2001
- ------------------------------------------------------------------------------
Comparative net income $ 58.1 $ 36.6
Discontinued operations (1.3) (2.3)
Tax benefit -- 42.0
------- -------
Reported $ 56.8 $ 76.3
======= =======
Three months ended
March 31,
------------------
Diluted earnings per common share 2002 2001
- ------------------------------------------------------------------------------
Comparative net income $ 0.75 $ 0.46
Discontinued operations (0.02) (0.03)
Tax benefit -- 0.53
------- -------
Reported $ 0.73 $ 0.96
======= =======
Liquidity and Capital Resources
Maytag's primary sources of liquidity are cash provided by operating activities
and borrowings. Detailed information on Maytag's cash flows is presented in the
Consolidated Statements of Cash Flows.
Net Cash Provided by Operating Activities: Cash flow provided by operating
activities consists primarily of net income adjusted for certain non-cash items,
changes in working capital items, changes in pension assets and liabilities and
postretirement benefits. Non-cash items include depreciation and amortization
and deferred income taxes. Working capital items consist primarily of accounts
receivable, inventories, other current assets and other current liabilities.
Net cash provided by continuing operation activities for the first quarter
of 2002 was $48 million, a decrease of $18 million from the prior year. This was
primarily due to $30 million of pension contributions in 2002 compared with no
contributions in the first quarter of the prior year.
A portion of Maytag's accounts receivable is concentrated among major
national retailers. A significant loss of business with any of these retailers
could have an adverse impact on Maytag's ongoing operations.
Total Investing Activities: Maytag's capital expenditures represent continual
investments in its businesses for new product designs, cost reduction programs,
replacement of equipment, capacity expansion and government mandated product
requirements and similar items.
Capital expenditures in the first quarter of 2002 were $50 million compared
to $30 million in 2001. Maytag plans to invest approximately $210 million in
capital expenditures in 2002.
Total Financing Activities: Dividend payments on Maytag's common stock in the
first quarter of 2002 and 2001 were $14 million, or $0.18 per share.
15
Funding requirements for investing and financing activities in excess of
cash on hand and cash flow from operations are supplemented by borrowings.
Maytag's commercial paper program is supported by two credit agreements with a
consortium of lenders that provide revolving credit facilities of $200 million
each, totaling $400 million. These agreements expire May 1, 2003 and May 3,
2004. Maytag had $84 million of commercial paper outstanding as of March 31,
2002. The credit agreements include financial covenants with respect to interest
coverage and leverage that Maytag was in compliance with as of March 31, 2002.
Maytag expects to be in compliance with these financial covenants throughout
2002. The existence of an event of default under the credit agreement would
adversely impact Maytag's ability to borrow through the sale of commercial
paper. Maytag has a shelf registration statement with the Securities and
Exchange Commission providing the ability to issue publicly an aggregate of $300
million of medium-term notes as of March 31, 2002.
Market Risks
Maytag is exposed to foreign currency exchange risk related to its transactions,
assets and liabilities denominated in foreign currencies. To manage certain
foreign exchange exposures, Maytag enters into foreign currency forward and
option contracts. Maytag's policy is to hedge a portion of its anticipated
foreign currency denominated export sales transactions, which are denominated
primarily in Canadian dollars, for periods not exceeding twelve months.
Maytag also is exposed to commodity price risk related to Maytag's purchase
of selected commodities used in the manufacture of its products. To reduce the
effect of changing raw material prices for selected commodities, Maytag has
entered into commodity swap agreements to hedge a portion of its anticipated raw
material purchases on selected commodities.
Maytag also is exposed to interest rate risk in the portfolio of Maytag's
debt. Maytag uses interest rate swap contracts to adjust the proportion of total
debt that is subject to variable and fixed interest rates. The swaps involve the
exchange of fixed and variable rate payments without exchanging the notional
principal amount.
There have been no material changes in the reported market risks of Maytag
since December 31, 2001. See further discussion of these market risks and
related financial instruments in the Maytag Corporation annual report on Form
10-K for the year ended December 31, 2001.
Contingencies
Maytag has contingent liabilities arising in the normal course of business,
including pending litigation, environmental remediation, taxes and other claims.
Maytag's legal department estimates the costs to settle pending litigation,
including legal expenses, based on its experience involving similar cases,
specific facts known, and if applicable based on judgments of outside counsel.
Maytag believes the outcome of these matters will not have a material adverse
effect on its consolidated financial position, results of operations or cash
flows.
Forward-Looking Statements
This Management's Discussion and Analysis contains statements that 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 the terms: "expect(s)," "intend(s),"
"may impact," "plan(s)," "should" or similar terms. 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 Maytag competes, including changes
in economic conditions in the geographic areas where Maytag's operations exist
or products are sold; timing, start-up and customer acceptance of newly designed
products; shortages of manufacturing capacity; competitive factors, such as
price competition and new product
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introductions; significant loss of business from a major national retailer; the
cost and availability of raw materials and purchased components, including the
impact of tariffs; union labor relationships; progress on capital projects; the
impact of business acquisitions or dispositions; the ability of Maytag to
integrate the operations from acquisitions into its operations; the costs of
complying with governmental regulations; litigation, product warranty claims 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 of Financial
Condition and Results of Operations.
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MAYTAG CORPORATION
Exhibits and Reports on Form 8-K
March 31, 2002
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Description
10.1 Separation Agreement dated December 21, 2001
10.2 First Amendment to Credit Agreement dated May 2, 2002
10.3 First Amendment to Credit Agreement (364-Day) dated May 2, 2002
10.4 Commitment Amount Increase dated May 2, 2002
10.5 Additional Executives covered by 3-year Change of Control Agreement
(b) Reports on Form 8-K
None.
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MAYTAG CORPORATION
Signatures
March 31, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAYTAG CORPORATION
Date: May 15, 2002 /s/Steven H. Wood
------------ -----------------------------
Steven H. Wood
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
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