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, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________________to____________________________
Commission File Number: 1-655
Maytag Corporation
(Exact name of registrant as specified in its charter)
Delaware 42-0401785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
403 West 4th Street North, Newton, Iowa 50208
(Address of principal executive offices) (Zip Code)
515-792-7000
(Registrant's telephone number, including area code)
______________________________________________________________________
(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, 1996:
Common Stock, $1.25 Par Value - 101,433,969
Page 1 of 16<PAGE>
FORM 10-Q
MAYTAG CORPORATION
Quarter Ended June 30, 1996
I N D E X
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Statements of Consolidated Income (Loss) 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 13
Signatures 14
Computation of Ratio of Earnings to Fixed Charges 15
Financial Data Schedule 16
2<PAGE>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
MAYTAG CORPORATION
Condensed Statements of Consolidated Income (Loss)
(Unaudited)
(In thousands except per share data)
Second Quarter Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
Net sales $ 754,619 $ 803,479 $1,485,865 $1,623,612
Cost of sales 547,404 603,146 1,076,223 1,202,055
Gross profit 207,215 200,333 409,642 421,557
Selling, general and
administrative expenses 125,396 128,135 251,122 269,325
Restructuring charge 40,000
Operating income 81,819 72,198 118,520 152,232
Interest expense (10,458) (14,064) (21,360) (29,536)
Loss on business
disposition (140,792) (140,792)
Other - net 891 (1,121) 1,955 202
Income (loss) before
income taxes and
extraordinary item 72,252 (83,779) 99,115 (17,894)
Income taxes 27,909 17,367 38,654 43,721
Income (loss) before
extraordinary item 44,343 (101,146) 60,461 (61,615)
Extraordinary item - loss
on early retirement of
debt (3,423) (3,423)
Net income (loss) $ 44,343 $ (104,569) $ 60,461 $ (65,038)
Income (loss) per
weighted average share
of Common stock:
Income (loss) before
extraordinary item $ 0.43 $ (0.95) $ 0.58 $ (0.58)
Extraordinary item -
loss on early
retirement of debt (0.03) (0.03)
Net income (loss) $ 0.43 $ (0.98) $ 0.58 $ (0.61)
Dividends per Common
share $ 0.140 $ 0.125 $ 0.280 $ 0.250
Weighted average shares
outstanding 102,604 106,981 103,667 106,924
See notes to condensed consolidated financial statements.
3<PAGE>
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition
June 30 December 31
1996 1995
(Unaudited)
(In thousands except share data)
ASSETS
Current assets
Cash and cash equivalents $ 2,056 $ 141,214
Accounts receivable 477,534 417,457
Inventories:
Finished products 215,740 163,968
Work in process, raw materials and
supplies 86,034 101,151
Total inventories 301,774 265,119
Deferred income taxes 41,299 42,785
Other current assets 28,328 43,559
Total current assets 850,991 910,134
Noncurrent assets
Deferred income taxes 86,279 91,610
Pension investments 1,490 1,489
Intangible pension asset 91,291 91,291
Other intangibles 295,511 300,086
Other noncurrent assets 35,149 29,321
Total noncurrent assets 509,720 513,797
Property, plant and equipment 1,499,192 1,411,926
Less allowance for depreciation 757,520 710,791
Total property, plant and equipment 741,672 701,135
Total assets $ 2,102,383 $ 2,125,066
See notes to condensed consolidated financial statements.
4<PAGE>
MAYTAG CORPORATION
Condensed Statements of Consolidated Financial Condition - Continued
June 30 December 31
1996 1995
(Unaudited)
(In thousands except share data)
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Accounts payable $ 159,865 $ 142,676
Compensation to employees 55,927 61,644
Accrued liabilities 145,089 156,041
Restructuring reserve 30,782
Income taxes payable 3,141
Current maturities of long-term
debt 3,475 3,201
Total current liabilities 395,138 366,703
Noncurrent liabilities
Deferred income taxes 9,563 14,367
Long-term debt 536,395 536,579
Postretirement benefits other
than pensions 439,598 428,478
Pension liability 64,536 88,883
Other noncurrent liabilities 60,828 52,705
Total noncurrent liabilities 1,110,920 1,121,012
Shareowners' equity
Common stock
Authorized - 200,000,000 shares
(par value $1.25)
Issued - 117,150,593 shares,
including shares in
treasury 146,438 146,438
Additional paid-in capital 471,970 472,602
Retained earnings 375,706 344,346
Cost of Common stock in treasury
(1996 - 15,250,958 shares; 1995-
11,745,395 shares) (328,394) (255,663)
Employee stock plans (57,148) (57,319)
Minimum pension liability
adjustment (5,656) (5,656)
Foreign currency translation (6,591) (7,397)
Total shareowners' equity 596,325 637,351
Total liabilities and
shareowners' equity $ 2,102,383 $ 2,125,066
See notes to condensed consolidated financial statements.
5<PAGE>
MAYTAG CORPORATION
Condensed Statements of Consolidated Cash Flows
(Unaudited)
Six Months Ended
June 30
1996 1995
(In thousands)
Operating activities
Net income (loss) $ 60,461 $ (65,038)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Loss on business disposition 140,792
Depreciation and amortization 54,392 59,227
Deferred income taxes 2,013 (14,775)
Restructuring charge 40,000
Changes in selected working capital items
exclusive of business dispositions:
Inventories (36,655) (43,058)
Receivables (44,110) (6,315)
Other current assets (736) 5,600
Restructuring reserve (9,218)
Reorganization reserve (903)
"Free flights" reserve (388)
Other current liabilities (2,610) (17,902)
Pension assets and liabilities (24,349) 6,709
Postretirement benefits 11,120 8,296
Other - net 2,294 10,742
Net cash provided by operating activities 52,602 82,987
Investing activities
Cash impact of business disposition - net
non-cash assets of disposition ($305,278),
less loss included above ($140,792) and amount
due from disposition ($180,269) (15,783)
Capital expenditures - net (90,347) (56,956)
Total investing activities (90,347) (72,739)
Financing activities
Increase(decrease) in long-term debt 89 (131,555)
Stock repurchases (85,655)
Increase in notes payable 48,244
Stock options exercised and other Common stock
transactions 12,464 4,018
Dividends (29,110) (26,895)
Total financing activities (102,212) (106,188)
Effect of exchange rates on cash 799 3,229
Decrease in cash and cash equivalents (139,158) (92,711)
Cash and cash equivalents at beginning of year 141,214 110,403
Cash and cash equivalents at end of period $ 2,056 $ 17,692
See notes to condensed consolidated financial statements.
6<PAGE>
MAYTAG CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments considered necessary for a
fair presentation have been included. Operating results for the six
month period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996.
For further information, refer to the consolidated financial
statements and footnotes included in the Maytag Corporation annual
report on Form 10-K for the year ended December 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
COMPARISON OF 1996 WITH 1995
NET SALES
Net sales in the second quarter of 1996 decreased 6.1 percent from the
second quarter of 1995 as reported; however, after excluding sales
totaling $82.4 million in the second quarter of 1995 made by the
Company's home appliance operations in Europe ("European Operations"),
which were sold with a disposition date of June 30, 1995, sales in the
second quarter of 1996 increased 4.7 percent from the comparable
quarter of 1995.
The home appliances segment had second quarter sales of $709.5
million, up 7.2 percent from sales of $661.8 million in the second
quarter of 1995. The increase in sales is primarily driven by new
product introductions in the floor care business and an increase in
unit sales in the major home appliances business. At mid-year, the
industry trade association projects 1996 major home appliances sales
in the U.S. to exceed 1995 levels by two to three percent.
Vending equipment sales in the second quarter of 1996 were $45.1
million, down 23.8 percent from 1995. Sales declined 18.1 percent
compared to last year after excluding sales totaling $4.1 million in
the second quarter of 1995 made by a Dixie-Narco manufacturing
operation in Eastlake, Ohio ("Eastlake Operation") which designed and
manufactured currency validators and electronic components used in the
gaming and vending industries and which was sold in December 1995.
Dixie-Narco's headquarters and vending machine manufacturing facility
in Williston, SC, are not affected by this business disposition. The
decrease in sales is primarily a result of a decrease in vender sales
due to a shift in customer preference from traditional venders to new
flexible venders, which maximize the different sizes and types of
beverage selections. Dixie-Narco is currently unable to produce
7<PAGE>
sufficient volume of the flexible venders to meet market requirements
due to production tooling lead times.
Net sales in the first half of 1996 decreased 8.5 percent from the
first half of 1995 as reported; however, after excluding sales
totaling $181.2 million in the first half of 1995 made by the European
Operations, sales in the first half of 1996 increased 3.0 percent from
the comparable first half of 1995. The home appliances segment had
first half sales of $1.392 billion, an increase of 4.8 percent from
sales of $1.329 billion in the first half of 1995. Vending equipment
sales in the first half of 1996 were $93.7 million, down 17.7 percent
from 1995. Vending equipment sales declined 11.2 percent compared to
last year after excluding sales totaling $8.3 million in the first
half of 1995 made by the Eastlake Operation.
GROSS PROFIT
Gross margin as a percent of sales in the second quarter of 1996
increased to 27.5 percent of sales from 24.9 percent of sales in the
second quarter of 1995. In the first half of 1996, gross margins
increased to 27.6 percent of sales from 26.0 percent of sales in the
first half of 1995. The main reason for the increase is the
divestiture of the lower margin European Operations.
Gross margins increased in the home appliances segment primarily as a
result of lower raw material prices and more favorable brand and
product sales mix. These improvements were partially offset by an
increase in distribution costs related to the transition to the new
regional distribution centers. The increased distribution costs are
expected to continue throughout 1996 as the transition continues.
Vending equipment gross margins decreased due to lower sales volumes
and an increase in manufacturing costs associated with bringing the
new flexible vender into production.
As mentioned above, the Company experienced lower raw material prices
in the first half of 1996 compared to the same period in 1995. These
lower raw material prices amounted to approximately $5 million of
additional gross profit, the majority of which was realized in the
second quarter of 1996. The Company expects lower raw material prices
to continue relative to 1995 throughout the remainder of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Second quarter selling, general and administrative expenses (SG&A)
expenses increased to 16.6 percent of sales from 15.9 percent of sales
in 1995. For the first six months of 1996, SG&A expenses increased to
16.9 percent of sales from 16.6 percent of sales in 1995. The
increase is primarily due to an increase in advertising and sales
promotion spending as a result of highly competitive market
conditions.
RESTRUCTURING CHARGE
During the first quarter of 1996, the Company announced the
restructuring of its major home appliance business designed to
strengthen its position in the industry and to deliver improved
results to both customers and shareowners. This includes the
8<PAGE>
consolidation of two business units into a single business unit which
will manage the operations of all of the major home appliance brands
and the closing of a cooking products plant in Indianapolis, Indiana,
with transfer of that production to the Company's plant in Cleveland,
Tennessee.
As a result of this restructuring, the Company recorded a one-time
restructuring charge of $40 million, or $24.4 million after-tax, in
the first quarter of 1996. This charge is primarily related to the
costs associated with the consolidation of cooking products production
and consolidation of the two business units. Of this $40 million
restructuring charge, it is estimated that cash expenditures of
approximately $24 million will be incurred in 1996. The non-cash
charges of approximately $16 million are primarily related to write-
offs of property, plant and equipment. During the first half of 1996,
the Company incurred approximately $9 million of costs, of which
approximately $7 million were cash expenditures, against the $40
million reserve established for this restructuring.
The Company anticipates an additional $10 million of restructuring
costs, not included in the one-time restructuring charge, to be
incurred during 1996 which will be reflected as an expense in the
period when incurred. Approximately $2.3 million of these additional
restructuring costs, the majority of which were cash expenditures,
were incurred in the first half of 1996.
OPERATING INCOME
Operating income for the second quarter of 1996 was $81.8 million, or
10.8 percent of sales, compared to $72.2 million, or 9.0 percent of
sales, in 1995. The increase in operating margin is primarily due to
the divestiture of the lower margin European Operations. Excluding
the results of the European Operations in the second quarter of 1995,
operating income was $80.6 million, or 11.2 percent of sales.
Operating income for the home appliances segment increased 10.2
percent to $85.2 million, or 12.0 percent of sales, in the second
quarter of 1996 from $77.3 million, or 11.7 percent of sales in the
second quarter of 1995. The increase in operating income is a result
of the improvement in gross profit mentioned above. Vending equipment
operating income decreased 63.9 percent to $3.0 million from $8.4
million in the second quarter of 1995. The decrease in operating
income is due to the decrease in gross profit mentioned above.
For the first half of 1996, operating income was $118.5 million.
However, excluding the $40 million restructuring charge recorded in
the first quarter of 1996, operating income for the first half of 1996
was $158.5 million, or 10.7 percent of sales, compared to $152.2
million, or 9.4 percent of sales, in the same period in 1995.
Excluding the results of the European Operations, operating income was
$159.4 million, or 11.1 percent of sales.
Operating income for the home appliances segment in the first half of
1996 increased to $163.9 million, or 11.8 percent of sales, an
increase of 4.0 percent compared to $157.6 million, or 11.9 percent of
sales, in the same period in 1995. Vending equipment operating income
decreased 43.3 percent to $8.9 million, or 9.5 percent of sales,
9<PAGE>
compared to $15.8 million, or 13.9 percent of sales, in the first six
months of 1995.
INTEREST EXPENSE
Interest expense decreased 25.6 percent from the second quarter of
1995 and 27.7 percent from the first half of 1995 as a result of the
debt reduction from the application of proceeds from the 1994 sale of
the Company's home appliance operations in Australia and New Zealand,
the 1995 sale of the European Operations and from cash provided by
operations.
OTHER INCOME AND EXPENSE
In the second quarter of 1995, the Company sold its European
Operations. The pretax loss from the sale was $140.8 million and
resulted in an after-tax loss of $135.4 million, or $1.27 per share.
INCOME TAXES
The effective tax rate decreased to 39 percent in the first six months
of 1996 from 40 percent in 1995 excluding amounts relating to the loss
on the sale of the European Operations. This decrease is primarily
due to the realization of capital gains and the corresponding
reduction to the valuation allowances recorded against the deferred
tax assets related to the Company's capital loss carryforwards
generated from the sale of the European Operations in the second
quarter of 1995.
EXTRAORDINARY ITEM
During the second quarter of 1995, the Company retired $43.7 million
of long-term debt at a cost of $3.4 million after-tax, or $0.03 per
share.
NET INCOME
Net income in the second quarter of 1996 was $44.3 million, or $0.43
per share, compared to a net loss of $104.6 million, or $0.98 per
share in 1995. Excluding the $135.4 million after-tax loss on the
sale of the European Operations and the $3.4 million extraordinary
item from the early retirement of debt, income for the second quarter
of 1995 was $34.2 million, or $0.32 per share. The increase in income
is due to an increase in operating income, lower interest expense, the
lower effective tax rate and the divestiture of the European
Operations which operated at a net loss in the second quarter of 1995.
Income related to the divested Eastlake Operation was not significant
to consolidated income in the second quarter of 1995.
Net income for the first half of 1996 was $60.5 million, or $0.58 per
share, compared to a net loss of $65 million, or $0.61 per share in
1995. Excluding the $24.4 million after-tax restructuring charge in
the first quarter of 1996 and the 1995 special items above, income for
the first half of 1996 was $84.9 million, or $0.82 per share, compared
to income of $73.7 million, or $0.69 per share in 1995.
10<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by
operating activities and external debt. Detailed information on the
Company's cash flows is presented in the Statements of Consolidated
Cash Flows.
Net Cash Provided By Operating Activities: Cash flow generated from
operating activities consists of net income (loss) adjusted for
certain non-cash income and expenses and changes in working capital.
Non-cash income and expenses include items such as depreciation,
amortization, the restructuring charge and deferred income taxes.
Working capital consists primarily of accounts receivable, inventory,
other current assets and other current liabilities.
Net cash provided by operating activities in the first six months of
1996 decreased from 1995 primarily due to a $40 million pension
contribution made in the first quarter of 1996 and an increase in
accounts receivable as a result of higher sales in 1996. This was
partially offset by an increase in net deferred income tax
liabilities.
Total Investing Activities: The cash impact of the business
disposition represents the cash sold with the sale of the European
Operations in 1995.
The Company continually invests in its businesses to improve product
design and manufacturing processes and to increase capacity when
needed.
Capital expenditures for the first six months of 1996 were $90.3
million compared to $57 million in the first six months of 1995. The
higher capital spending is due to the continuation of several major
capital projects that the Company plans to continue to implement over
the next several years. These projects include a new high efficiency
clothes washer and a complete redesign of the Company's refrigerator
product lines. Planned capital expenditures for 1996 are
approximately $190 million and relate to these projects as well as
other ongoing production improvements and product enhancements.
Capital spending in 1996 includes approximately $8 million of interest
expense which will be capitalized as a result of the major projects
described above.
In the second quarter of 1996, the Company announced plans to invest
approximately $44 million to expand its Hoover floor care division's
manufacturing facility in El Paso, Texas. The facility expansion will
be used to add a new production line to manufacture a new Hoover
product. The capital expenditure is part of the Company's planned 1996
and 1997 capital spending programs.
Total Financing Activities: Dividend payments for the first six
months of 1996 amounted to $29.1 million, or $0.28 per share, compared
to $26.9 million, or $0.25 per share in the same period in 1995.
In the fourth quarter of 1995, the Company commenced a stock
repurchase program to buy up to 10.8 million shares of the Company's
outstanding Common stock. Through June 30, 1996, 6.8 million shares
11<PAGE>
had been repurchased in the program at a total cost of $140.4 million.
The shares repurchased favorably impacted earnings per share by $0.02
in the second quarter of 1996. The repurchase program is expected to
continue periodically for an unspecified length of time.
Any funding requirements for future capital expenditures and other
cash requirements in excess of cash on hand and generated from future
operations will be supplemented by the issuance of commercial paper,
debt securities and bank borrowings. The Company's commercial paper
program is supported by a credit agreement with a consortium of banks
which provides revolving credit facilities totaling $400 million.
This agreement expires July 27, 2000 and includes covenants for
interest coverage and leverage.
CONTINGENCIES/OTHER
The Company is contingently liable on its guarantees of banks loans of
$19.8 million made to a soft drink bottler, Buenos Aires Embotelladora
Inc. (Baesa), and used to finance purchases of vending equipment from
Dixie-Narco. Baesa has announced it is unable to pay the interest or
principal of its bank loans through October 15, 1996 and it plans to
explore alternatives with its lenders for restructuring its debt. The
Company also has other receivables owed by the customer totaling $1.6
million.
In connection with the sale of the European Operations, the terms of
the contract provide for a post closing adjustment to the price. The
post-closing adjustment and certain warranty claims asserted by the
buyer were in dispute, but have been resolved with satisfaction to
both parties and with no material impact to the Company. In
connection with the sale the Company has made various warranties to
the buyer, including the accuracy of tax net operating losses in the
United Kingdom, and agreed to indemnify the buyer for liabilities
resulting from customer claims under the "free flights" promotions in
excess of the reserve balance at the time of sale. There are
limitations on the Company's liability in the event the buyer incurs a
loss as a result of breach of the warranties. The Company does not
expect the resolution of these items to have a material adverse effect
on its financial condition.
As announced in 1995, the Company is conducting an in-home inspection
program to eliminate a potential problem with a small electrical
component in Maytag brand dishwashers. Although the ultimate cost of
the repair will not be known until the inspection program is complete,
it is not expected to have a material impact on the Company's results.
The Company is currently negotiating with the supplier of the
component regarding reimbursement.
12<PAGE>
MAYTAG CORPORATION
Exhibits and Reports on Form 8-K
June 30, 1996
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
June 30, 1996.
13<PAGE>
MAYTAG CORPORATION
Signatures
June 30, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MAYTAG CORPORATION
s/s Gerald J. Pribanic
Date August 14, 1996
Gerald J. Pribanic
Executive Vice President and
Chief Financial Officer
s/s Steven H. Wood
Steven H. Wood
Vice President, Financial
Reporting and Audit and Chief
Accounting Officer
14<PAGE>
MAYTAG CORPORATION
Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands of dollars except ratios)
Six
Months
Ended
June Year Ended December 31
1996 1995 1994 1993 1992 1991
Consolidated pretax
income from
continuing
operations
before
extraordinary
item and
cumulative
effect of
accounting
changes $99,115 $59,804 $241,337 $89,870 $7,546 $123,417
Interest expense 21,360 52,087 74,077 75,364 75,004 75,159
Depreciation of
capitalized
interest 796 1,695 1,772 1,546 933 348
Interest portion of
rental expense 3,245 8,789 10,722 10,480 11,264 11,177
Earnings $124,516 $122,375 $327,908 $177,260$94,747 $210,101
Interest expense $21,360 $52,087 $74,077 $75,364$75,004 $75,159
Interest capitalized 3,113 2,534 547 1,484 3,886 6,329
Interest portion of
rental expense 3,245 8,789 10,722 10,480 11,264 11,177
Fixed charges $27,718 $63,410 $85,346 $87,328$90,154 $92,665
Ratio of earnings to
fixed charges 4.49 1.93 3.84 2.03 1.05 2.27
15<PAGE>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,056
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