UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 1994
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________ to_____________________
Commission File Number: 1-655
Maytag Corporation
(Exact name of registrant as specified in its charter)
Delaware 42-0401785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
403 West 4th Street North, Newton, Iowa 50208
(Address of principal executive offices) (Zip Code)
515-792-8000
(Registrant's telephone number, including area code)
___________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x
No___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of June 30, 1994:
Common Stock, $1.25 Par Value - 107,129,141
Page 1 of 13
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FORM 10-Q
MAYTAG CORPORATION
Quarter Ended June 30, 1994
I N D E X
Page
PART I FINANCIAL INFORMATION
Item 1.Financial Statements
Condensed Statements of Consolidated Income 3
Condensed Statements of Consolidated Financial Condition 4
Condensed Statements of Consolidated Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K 10
Computation of Per Share Earnings 11
Computation of Ratio of Earnings to Fixed Charges 12
Restatement of Segment Information 13
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Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Condensed Statements of Consolidated Income
(Unaudited)
(Thousands of dollars except per share data)
Second Quarter Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Net sales $870,385 $753,256 $1,660,950 $1,470,109
Cost of sales 640,769 569,444 1,226,844 1,113,564
Gross profit 229,616 183,812 434,106 356,545
Selling, general and administrative
expenses 138,850 128,818 273,314 302,995
Operating income 90,766 54,994 160,792 53,550
Interest expense (19,075) (19,097) (37,475) (37,832)
Other - net (758) 557 1,062 3,160
Income before income taxes and
cumulative effect of accounting 70,933 36,454 124,379 18,878
change
Income taxes 29,792 15,147 52,239 8,117
Income before cumulative
effect of accounting change 41,141 21,307 72,140 10,761
Cumulative effect of accounting
change ______ ______ (3,190) ______
Net income $ 41,141 $ 21,307 $ 68,950 $ 10,761
Income per average share of Common
stock:
Income before cumulative effect
of accounting change $ .39 $ .20 $ .68 $ .10
Cumulative effect of accounting
change . . (.03) .
Net income per Common share $ 0.39 $ 0.20 $ 0.65 $ 0.10
Dividends per Common share $ .125 $ .125 $ .250 $ .250
Average shares outstanding 106,796 106,175 106,719 106,140
See notes to condensed consolidated financial statements.
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MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition
June 30 December 31
1994 1993
(Unaudited)
(Thousands of dollars)
ASSETS
Current Assets
Cash and cash equivalents $ 15,923 $ 31,730
Accounts receivable 643,562 532,353
Inventories:
Finished products 301,462 282,841
Work in process, raw materials and supplies 146,249 146,313
447,711 429,154
Deferred income taxes 46,732 46,695
Other current assets 11,938 16,919
Total current assets 1,165,866 1,056,851
Noncurrent Assets
Deferred income taxes 75,801 68,559
Pension investments 164,378 168,103
Intangibles 315,001 319,657
Other noncurrent assets 57,145 35,266
612,325 591,585
Property, Plant and Equipment 1,486,093 1,447,691
Less allowance for depreciation 681,840 626,629
Total property, plant and equipment 804,253 821,062
Total Assets $2,582,444 $2,469,498
See notes to condensed consolidated financial statements.
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MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition - Continued
June 30 December 31
1994 1993
(Unaudited)
(Thousands of dollars)
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Notes payable $ 199,300 $ 157,571
Accounts payable 202,087 195,981
Compensation to employees 67,470 84,405
Accrued liabilities 171,392 178,015
Income taxes payable 8,201 16,193
Current maturities of long-term debt 58,719 18,505
Total current liabilities 707,169 650,670
Noncurrent liabilities
Deferred income taxes 52,987 44,882
Long-term debt 683,517 724,695
Postretirement benefits other than
pensions 402,816 391,635
Other noncurrent liabilities 87,872 70,835
Total noncurrent liabilities 1,227,192 1,232,047
Shareowners' Equity
Common stock
Authorized - 200,000,000 shares (par
value $1.25)
Issued - 117,150,593 shares,
including shares in treasury 146,438 146,438
Additional paid-in capital 478,340 480,067
Retained earnings 368,010 325,823
Cost of Common stock in treasury (1994-
10,021,452 shares; 1993- 10,430,833
shares) (223,377) (232,510)
Employee stock plans (63,356) (62,342)
Foreign currency translation (57,972) (70,695)
Total shareowners' equity 648,083 586,781
Total Liabilities and Shareowners'
Equity $2,582,444 $2,469,498
See notes to condensed consolidated financial statements.
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MAYTAG CORPORATION
Condensed Statements of Consolidated Cash Flows
(Unaudited)
Six Months Ended
June 30
1994 1993
(Thousands of
Dollars)
Operating Activities
Net income $ 68,950 $ 10,761
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 58,591 54,067
Deferred income taxes 1,193 (33,506)
Free flights promotion expenses 700 50,097
Changes in selected working capital items:
Inventories (14,132) (64,725)
Receivables and other current assets (101,611) (58,448)
Free flights reserve (25,812) (13,473)
Reorganization reserve (19,207) (17,739)
Other current liabilities 17,406 (4,205)
Net change in pension investments 6,809 (935)
Change in postretirement medical liability 11,181 5,985
Other - net (10,084) 4,098
Net cash used in operating activities (6,016) (68,023)
Investing Activities
Capital expenditures - net (29,309) (40,475)
Net cash used in investing activities (29,309) (40,475)
Financing Activities
Proceeds from long-term debt 5,500
Decrease in long-term debt (1,208) (52,991)
Increase in notes payable 38,675 181,413
Stock options exercised and other stock
transactions 6,354 558
Dividends (26,763) (26,772)
Net cash provided by financing activities 17,058 107,708
Effect of exchange rates on cash 2,460 504
Decrease in cash and cash equivalents (15,807) (286)
Cash and cash equivalents at beginning of year 31,730 57,032
Cash and cash equivalents at end of period$ 15,923 $ 56,746
See notes to condensed consolidated financial statements.
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MAYTAG CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 1994
(Unaudited)
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
have been included. Operating results for the six month period ended June
30, 1994 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1994. 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,
1993.
Commencing with the first quarter of 1994, the Company changed its method
of allocating certain components of income and expense to its industry
segments and in compiling its geographic information. The Company is now
allocating to its business units certain income and expenses that
previously were allocated to "Corporate". The effect of this change is not
material and certain industry segment and geographic information for the
second quarter and first six months of 1993 identified below has been
restated to reflect this change.
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.
COMPARISON OF 1994 WITH 1993
Net sales in the second quarter of 1994 increased over the second quarter
of 1993 primarily as a result of the increase in sales of the North
American Appliance Group, as well as higher sales by Dixie-Narco, the
Company's vending equipment operation. The North American Appliance Group
had sales of $686.5 million, up 20.8 percent from sales of $568.4 million
in the second quarter of 1993. The increase in sales of that group is
primarily due to volume increases from market share gains in virtually all
product categories and the introduction of new products. Year-over-year
growth in sales of that group is expected for the remainder of the year,
but at a lower level than was experienced in the first and second quarters.
Dixie-Narco's sales in the second quarter were up 26.7 percent, from $47.5
million in 1993 to $60.2 million in 1994 due to sales to a customer that
are not expected to continue this year and the introduction of a new
product. The Company expects to offset the loss of sales to this customer
in the second half with greater sales of the new product. Sales by the
Hoover European Appliance Group ("Hoover Europe") were $87 million in the
second quarter of 1994, compared to $101.3 million in the second quarter of
1993. This decrease is due to a loss of market share in the United Kingdom,
along with foreign currency fluctuations.
The increase in net sales for the first half of 1994 is primarily due to
the increase in year-to-date net sales in the North American Appliance
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Group of $203.2 million or 18.2 percent, partially offset by the decrease
in net sales of Hoover Europe of $28.1 million or 13.7 percent from the
same period in 1993. Dixie-Narco's sales also contributed to the year-
over-year sales improvement by increasing 18.8 percent to $101.4 million in
the six month period.
The improvement in gross margin in both the second quarter and six months
is primarily the result of improved volume-related production efficiencies,
reduced material costs from a coordinated purchasing program, and favorable
product mix in the North American Appliance Group. In addition, margins in
Hoover Europe improved due to lower operating costs from completion of the
floorcare plant consolidation, lower levels of employment and reduced
material costs.
Second quarter and first half selling, general and administrative expenses
(SG&A) increased over 1993 (excluding the special charge described below)
primarily to support the higher sales volumes. In the first quarter of
1993, the Company recognized a one-time $50 million pretax charge ($30
million aftertax or $.28 per share) for two Hoover Europe free flights
promotion programs ("free flights promotion"). Excluding the free flights
promotion, SG&A expenses were $253 million or 17.2 percent of sales for the
first six months of 1993.
The improvement in consolidated operating income in the second quarter of
1994 over the prior year was primarily due to the North American Appliance
Group, which increased to $84.3 million, up 46.6 percent from $57.5 million
a year ago. Operating income for Hoover Europe was $2.2 million in the
second quarter of 1994 compared to a loss of $3.6 million during the
comparable period in 1993. Poor economic conditions in parts of Europe
continue to impact Hoover Europe's results. However, cost containment
programs have contributed to the improvement year-over-year. Dixie-Narco
had second quarter operating income of $8.1 million compared to $6.6
million a year ago. Excluding the charge for the free flights promotion in
the first quarter of 1993, consolidated six month operating income would
have been $103.6 million, or 7 percent of sales.
The year-to-date decrease in the Company's effective tax rate is due to
higher losses in Europe in 1993 which received a lower tax benefit and
resulted in an increase in the worldwide effective tax rate in 1993.
Excluding the free flights promotion charge ($30 million aftertax) in 1993,
the year-to-date income before cumulative effect of accounting change for
1993 would have been $40.8 million or $.38 per share.
The $.03 per share cumulative effect of accounting change in the first six
months of 1994 relates to the mandatory adoption of an accounting
pronouncement, Statement of Financial Accounting Standards No. 112
"Employers' Accounting for Postemployment Benefits"(FAS 112), which the
Company adopted effective January 1, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The increase in accounts receivable since December 31, 1993 is primarily
due to higher sales volumes in the North American Appliance Group.
Inventory increases since year-end are primarily due to higher production
volumes in the North American Appliance Group to support increased demand.
Other noncurrent assets increased from December 31, 1993 primarily due to
the recording of receivables for certain income tax carrybacks and an
8
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increase in long-term financing notes to vending equipment customers.
The liability for compensation to employees decreased since year-end due to
payments made in the first six months in connection with the European
reorganization announced in 1992. Other noncurrent liabilities increased
from year-end principally due to ongoing charges for pensions and the
liability recognized as the result of the adoption of FAS 112.
The decrease in net cash used in operations in the first six months of 1994
compared to 1993 was a result of increased earnings which included higher
non-cash charges relating to depreciation, amortization, postretirement
medical and pensions (due to a decline in the discount rate). The decrease
in net deferred income tax assets results primarily from the first six
months of 1993 reflecting the deferred tax benefit for the free flights
promotion and certain reclassifications made in both periods between
current taxes payable. Offsetting this improvement was a use of cash for
increases in inventory and receivables, and payments for the free flights
promotion and the Company's North American and European reorganizations.
Current liabilities increased primarily to support the additional inventory
and receivables.
The lower capital expenditures for the first six months of 1994 compared to
1993 resulted from a change in the timing of spending. Full year planned
capital expenditures for 1994 approximate $110 million. Compliance with
current and anticipated laws and regulations governing product performance
related to the protection of the environment is expected to significantly
increase capital expenditures over the next five years. Although the
amounts are not known at this time, the total annual capital spending is
expected to exceed depreciation in these years.
The net cash used for operations, capital expenditures, dividends, and the
reduction in debt (long term and current maturities) in the first six
months of 1994 was funded through an increase in notes payable (primarily
commercial paper borrowings).
On May 23, 1994, the Company announced its intention to divest its Hoover
operations in Australia and New Zealand, preferably by way of an initial
public stock offering of its combined Australian subsidiaries. The ongoing
impact on the Company's income statement from the loss of Australian
earnings is not considered material. As of June 30, 1994, part of the
unrecognized loss reported in Shareowners' Equity as Foreign Currency
Translation is attributable to the Australia and New Zealand operations.
This amount will require recognition in the Company's earnings when the
divestiture is completed. Depending on the amount of the proceeds realized
from the divestiture, the transaction could result in a one-time loss which
is estimated not to exceed $.08 per share. However, the overall impact on
earnings from the divestiture is not determinable at this time.
On July 14, 1994, the Company entered into a new credit agreement with a
consortium of banks which provide revolving credit facilities totaling $300
million. This agreement, which replaces the two previous credit
agreements, has a four year term and includes covenants for interest
coverage and leverage. It does not include the covenant in the previous
agreements requiring the Company to maintain certain minimum levels of
tangible net worth.
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MAYTAG CORPORATION
Exhibits and Reports on Form 8-K
June 30, 1994
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Computation of Per Share Earnings
(12) Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
Under Item 5, the Company filed a Current Report on Form 8-K dated May 23,
1994 relating to the intended divestiture of its Hoover operations in
Australia and New Zealand.
MAYTAG CORPORATION
Signatures
June 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAYTAG CORPORATION
Date August 15, 1994 By M. A. Garth
M. A. Garth
Vice President and Controller
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MAYTAG CORPORATION
Exhibit 11
Computation of Per Share Earnings
(Amounts in thousands except per share data)
Second Quarter Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
PRIMARY
Average shares outstanding 106,382 106,124 106,317 106,089
Net effect of dilutive stock
options--based on the treasury
stock method using average
market price 315 48 309 48
Employee stock ownership plans 99 3 93 3
TOTAL 106,796 106,175 106,719 106,140
Income before cumulative
effect of accounting changes $ 41,141 $ 21,307 $ 72,140 $ 10,761
Cumulative effect of accounting
changes (3,190)
Net income $ 41,141 $ 21,307 $ 68,950 $ 10,761
Per share amounts:
Income before cumulative
effect of accounting changes $ .39 $ .20 $ .68 $ .10
Cumulative effect of accounting
changes . . (.03) .
Net income $ 0.39 $ 0.20 $ 0.65 $ 0.10
FULLY DILUTED
Average shares outstanding 106,382 106,124 106,317 106,089
Net effect of dilutive stock
options--based on the treasury
stock method using average
market price 349 64 351 56
Employee stock ownership plans 99 3 93 3
Assumed conversion of 6.5%
convertible debentures 411 411
TOTAL 107,241 106,191 107,172 106,148
Income before cumulative
effect of accounting changes $ 41,141 $ 21,307 $ 72,140 $ 10,761
Add 6.5% convertible debenture
interest net of income tax 59 118
effect
Cumulative effect of accounting
changes (3,190)
Net income $ 41,200 $ 21,307 $ 69,068 $ 10,761
Per share amounts:
Income before cumulative
effect of accounting changes $ .38 $ .20 $ .67 $ .10
Cumulative effect of accounting
changes . . (.03) .
Net income $ 0.38 $ 0.20 $ 0.64 $ 0.10
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MAYTAG CORPORATION
Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands of dollars except ratios)
Six
Months
Ended Year Ended December 31
6-30-94 1993 1992 1991 1990 1989
Consolidated pre-tax
income from
continuing operations
before cumulative
effect of accounting
changes $124,379 $ 89,870 $ 7,546 $123,417 $159,405 $206,972
Interest expense 37,475 75,364 75,004 75,159 81,966 83,398
Depreciation of
capitalized interest 825 1,546 933 348 57
Interest portion of
rental expense 4,695 10,480 11,264 11,177 9,183 7,107
Earnings $167,374 $177,260 $ 94,747 $210,101 $250,611 $297,477
Interest expense $ 37,475 $ 75,364 $ 75,004 $ 75,159 $ 81,966 $ 83,398
Interest capitalized 244 1,484 3,886 6,329 5,348
Interest portion of
rental expense 4,695 10,480 11,264 11,177 9,183 7,107
Fixed Charges $ 42,414 $ 87,328 $ 90,154 $ 92,665 $ 96,497 $ 90,505
Ratio of earnings
to fixed charges 3.95 2.03 1.05 2.27 2.60 3.29
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MAYTAG CORPORATION
Exhibit 99
Restatement of Segment Information
(Amounts in thousands of dollars)
During the first quarter of 1994, the Company changed its allocation of
certain income and expense items between Corporate and its business units.
The Company's first quarter and second quarter 1994 earnings releases
reported operating income for these business units under the revised basis
for the first and second quarters of 1993, but not for any of the other
interim periods in 1993. The table below shows 1993 operating income for
the Company's North American and European business units, both as reported
during interim periods in 1993 and as restated:
1993 Operating Income
As Reported As Restated
North American Appliances
First Quarter $ 50,957 $ 52,715
Second Quarter 53,086 57,537
Six Months 104,043 110,252
Third Quarter 66,400 65,462
Nine Months 170,443 175,714
Fourth Quarter 58,972 57,670
Year $229,415 $233,384
Vending Equipment
First Quarter $ 3,615 $ 3,778
Second Quarter 6,471 6,633
Six Months 10,086 10,411
Third Quarter 4,416 4,497
Nine Months 14,502 14,908
Fourth Quarter 3,064 3,036
Year $ 17,566 $ 17,944
Total North America
First Quarter $ 54,572 $ 56,493
Second Quarter 59,557 64,170
Six Months 114,129 120,663
Third Quarter 70,816 69,959
Nine Months 184,945 190,622
Fourth Quarter 62,036 60,706
Year $246,981 $251,328
Europe
First Quarter $(54,087) $(54,464)
Second Quarter (3,606) (3,582)
Six Months (57,693) (58,046)
Third Quarter (7,813) (7,992)
Nine Months (65,506) (66,038)
Fourth Quarter (6,852) (7,543)
Year $(72,358) $(73,581)
13
