UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal Year Ended December 31, 1998
or
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to _________________
Commission file number 1-655
MAYTAG CORPORATION
A Delaware Corporation I.R.S. Employer Identification No. 42-0401785
403 West Fourth Street North, Newton, Iowa 50208
Registrant's telephone number, including area code: 515-792-7000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $1.25 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
The aggregate market value of the voting stock (common stock) held by non-
affiliates of the registrant as of the close of business on March 1, 1999 was
$4,888,467,050. The number of shares outstanding of the registrant's common
stock (par value $1.25) as of the close of business on March 1, 1999 was
89,083,682.
DOCUMENTS INCORPORATED BY REFERENCE
As noted in Part III of this Form 10-K, portions of the registrant's proxy
statement for its annual meeting of shareholders to be held May 13, 1999 have
been incorporated by reference.
1<PAGE>
MAYTAG CORPORATION
1998 ANNUAL REPORT ON FORM 10-K CONTENTS
Item Page
PART I:
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business - Home Appliances . . . . . . . . . . . . . . . . . . . 3
Business - Commercial Appliances . . . . . . . . . . . . . . . . 4
Business - International Appliances . . . . . . . . . . . . . . 5
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 7
4. Submission of Matters to a Vote of Security Holders . . . . . . 7
Executive Officers of the Registrant . . . . . . . . . . . . . . 7
PART II:
5. Market for the Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 9
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 10
7A. Quantitative and Qualitative Disclosures About Market Risk . . . 18
8. Financial Statements and Supplementary Data . . . . . . . . . . 18
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 47
PART III:
10. Directors and Executive Officers of the Registrant . . . . . . . 47
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 47
12. Security Ownership of Certain Beneficial Owners and Management . 48
13. Certain Relationships and Related Transactions . . . . . . . . . 48
PART IV:
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 48
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2<PAGE>
PART I
Item 1. Business.
Maytag Corporation (the "Company") was organized as a Delaware corporation in
1925. The Company operates in three business segments: home appliances,
commercial appliances and international appliances. Financial and other
information relating to these reportable business segments is included in Part
II, Item 7, Pages 10-13, and Item 8, Pages 44-46.
HOME APPLIANCES
The home appliances segment represented 85.6 percent of consolidated net sales
in 1998.
The operations of the Company's home appliances segment manufacture major
appliances (laundry products, dishwashers, refrigerators, cooking appliances)
and floor care products. These products are primarily sold to major national
retailers and independent retail dealers in North America and targeted
international markets. These products are sold primarily under the Maytag,
Hoover, Jenn-Air and Magic Chef brand names. Included in this segment is Maytag
International, Inc., the Company's international marketing subsidiary, which
administers the sale of home appliances and licensing of certain home appliance
brands in markets outside the United States and Canada.
During the fourth quarter of 1997, the Company announced an agreement with
Sears, Roebuck and Co. to begin selling the full line of Maytag brand major
appliances through Sears stores throughout the U.S. The major appliances were
available in all Sears full line and authorized dealers stores beginning in
February 1998. During the third quarter of 1998, Maytag Corporation announced
an agreement with Sears Canada Inc. to begin selling Maytag brand major home
appliances in Sears Canada stores in October 1998.
During the first quarter of 1996, the Company announced the restructuring of its
major appliance operations in an effort to strengthen its position in the
industry and to deliver improved performance to both customers and shareowners.
This included the consolidation of two separate organizational units into a
single operation responsible for all activities associated with the manufacture
and distribution of the Company's brands of major appliances and the closing of
a cooking products plant in Indianapolis, Indiana, with transfer of that
production to an existing plant in Cleveland, Tennessee.
A portion of the Company's operations and sales is outside the United States.
The risks involved in foreign operations vary from country to country and
include tariffs, trade restrictions, changes in currency values, economic
conditions and international relations.
The Company uses basic raw materials such as steel, copper, aluminum, rubber and
plastic in its manufacturing process in addition to purchased motors,
compressors, timers, valves and other components. These materials are supplied
by established sources and the Company anticipates that such sources will, in
general, be able to meet its future requirements.
The Company holds a number of patents which are important in the manufacture of
its products. The Company also holds a number of trademark registrations of
which the most important are ADMIRAL, HOOVER, JENN-AIR, MAGIC CHEF, MAYTAG and
the associated corporate symbols.
3<PAGE>
The Company's home appliance business is generally not considered seasonal.
A portion of the Company's accounts receivable is concentrated among major
national retailers. A significant loss of business with any of these national
retailers could have an adverse impact on the Company's ongoing operations.
The dollar amount of backlog orders of the Company is not considered significant
for home appliances in relation to the total annual dollar volume of sales.
Because it is the Company's practice to maintain a level of inventory sufficient
to cover anticipated shipments and since orders are generally shipped upon
receipt, a large backlog would be unusual.
The home appliances market is highly competitive with the two principal
competitors being larger than the Company. The Company is focused on growth
through product innovation that supports superior product performance in the
Company's premium brands. The Company also uses brand image, product quality,
customer service, advertising and warranty as methods of competition.
Expenditures for company-sponsored research and development activities relating
to the development of new products and the improvement of existing products are
included in Part II, Item 8, page 43. Most of the research and development
expenditures relate to the home appliances segment.
Although the Company has manufacturing sites with environmental concerns,
compliance with laws and regulations regarding the discharge of materials into
the environment or relating to the protection of the environment has not had a
significant effect on capital expenditures, earnings or the Company's
competitive position.
The Company has been identified as one of a group of potentially responsible
parties by state and federal environmental protection agencies in remedial
activities related to various "superfund" sites in the United States. The
Company presently does not anticipate any significant adverse effect upon the
Company's earnings or financial condition arising from resolution of these
matters. Additional information regarding environmental remediation is included
in Part II, Item 8, Page 43-44.
The Company is subject to changes in government mandated energy and
environmental standards regarding appliances which may become effective over the
next several years. The Company is in compliance with those existing standards
where it does business and intends to be in compliance with these various
standards where it does business, which affect the entire appliance industry, as
they become effective.
The number of employees of the Company in the home appliances segment as of
January 31, 1999 was 17,235.
COMMERCIAL APPLIANCES
The commercial appliances segment represented 11.2 percent of consolidated net
sales in 1998.
The operations of the Company's commercial appliances segment manufacture
commercial cooking and vending equipment. These products are primarily sold to
distributors, soft drink bottlers, restaurant chains and dealers in North
America and targeted international markets. These products are sold primarily
under the Dixie-Narco, Blodgett and Pitco Frialator brand names.
4<PAGE>
In the fourth quarter of 1997, the Company acquired all of the outstanding
shares of G.S. Blodgett Corporation, a manufacturer of commercial ovens, fryers
and charbroilers for the food service industry, for $96.4 million. In
connection with the purchase, the Company also incurred transaction costs of
$4.2 million and retired debt of approximately $53.2 million. Additional
information regarding this acquisition is included in Part II, Item 8, Page 28-
29.
The Company uses steel as a basic raw material in its manufacturing processes in
addition to purchased motors, compressors and other components. These materials
are supplied by established sources and the Company anticipates that such
sources will, in general, be able to meet its future requirements.
The Company holds a number of patents which are important in the manufacture of
its products. The Company also holds a numbers of trademark registrations of
which the most important are DIXIE-NARCO, BLODGETT and PITCO FRIALATOR and the
associated corporate symbols.
Commercial appliance sales are considered seasonal to the extent that the
Company normally experiences lower vending equipment sales in the fourth quarter
compared to other quarters.
Within the commercial appliances segment, the Company's vending equipment sales
are dependent upon a few major soft drink suppliers. Therefore, the loss of one
or more of these customers could have a significant adverse effect on the
commercial appliances segment.
The dollar amount of backlog orders of the Company is not considered significant
for commercial appliances in relation to the total annual dollar volume of
sales. Because it is the Company's practice to maintain a level of inventory
sufficient to cover shipments and since orders are generally shipped upon
receipt, a large backlog would be unusual.
The Company uses brand image, product quality, product innovation, customer
service, warranty and price as its principal methods of competition.
Expenditures for company-sponsored research and development activities relating
to the development of new products and the improvement of existing products are
included in Part II, Item 8, page 43.
Although the Company has manufacturing sites with environmental concerns,
compliance with laws and regulations regarding the discharge of materials into
the environment or relating to the protection of the environment has not had a
significant effect on capital expenditures, earnings or the Company's
competitive position.
The number of employees of the Company in the commercial appliances segment as
of January 31, 1999 was 2,510.
INTERNATIONAL APPLIANCES
The international appliances segment represented 3.2 percent of consolidated net
sales in 1998.
The international appliances segment consists of the Company's 50.5 percent
owned joint venture in China, Rongshida-Maytag, which manufactures and
distributes laundry products and refrigerators. These products are primarily
sold to department stores and distributors in China under the RSD brand name.
5<PAGE>
In 1996, the Company invested $35 million ($29.6 million, net of cash acquired)
to acquire its 50.5 percent ownership in Rongshida-Maytag. The Company also
committed additional cash investments of approximately $35 million, of which $7
million, $19 million and $9 million were contributed in 1998, 1997 and 1996,
respectively. The Company's joint venture partner also committed additional
cash investments of approximately $35 million, of which $7 million, $19 million
and $9 million were contributed in 1998, 1997 and 1996, respectively. For more
information regarding this acquisition, see Part II, Item 8, pages 28-29.
In the fourth quarter of 1998, Rongshida-Maytag acquired all of the outstanding
shares of Three-Gorges, a manufacturer of home laundry products in China. This
business produces and markets home laundry equipment and has annual sales of
approximately $15 million. In connection with the purchase, Rongshida-Maytag
assumed $8 million in notes payable and long-term debt. The operations of Three
Gorges have been merged into Rongshida-Maytag. For more information regarding
this acquisition, see Part II, Item 8, page 28-29.
Rongshida-Maytag is subject to the risks involved with international operations
including, but not limited to, economic conditions and international relations
in the geographic areas where Rongshida-Maytag's operations exist or products
are sold, governmental restrictions and changes in currency values.
Rongshida-Maytag uses steel and plastic as the basic raw material in its
manufacturing processes. These materials are supplied primarily from suppliers
in Asian countries.
Rongshida-Maytag holds a number of patents which are important in the
manufacture of its products. Rongshida-Maytag also holds the trademark
registrations of RSD.
Rongshida-Maytag's business is seasonal to the extent the first six months of
the year normally experience higher sales than the second half of the year.
Rongshida-Maytag is not dependent upon a single customer or a few customers.
The international appliance market in which Rongshida-Maytag competes is highly
competitive with approximately six principal competitors. Rongshida-Maytag uses
extensive distribution channels, low manufacturing costs, product quality, and
customer service as its principal methods of competition.
Expenditures for company-sponsored research and development activities relating
to the development of new products and the improvement of existing products,
including those for Rongshida-Maytag, are included in Part II, Item 8, page 43.
The number of employees of Rongshida-Maytag as of January 31, 1999 was 4,193.
Item 2. Properties.
The Company's corporate headquarters are located in Newton, Iowa. Major offices
and manufacturing facilities in the United States related to the home appliances
segment are located in: Newton, Iowa; Galesburg, Illinois; Cleveland,
Tennessee; Jackson, Tennessee; Milan, Tennessee; Herrin, Illinois; North Canton,
Ohio; and El Paso, Texas. In addition to manufacturing facilities in the United
States, the Company has two other North American manufacturing facilities in
Mexico.
Major offices and manufacturing facilities in the United States related to the
commercial appliances segment are located in: Williston, South Carolina;
6<PAGE>
Burlington, Vermont; and Bow, New Hampshire.
Major offices and manufacturing facilities related to the international
appliances segment are located in Hefei and Chongqing, China.
The facilities for the home appliances, commerical appliances and international
appliances segments are well maintained, suitably equipped and in good operating
condition. The facilities used had sufficient capacity to meet production needs
in 1998, and the Company expects that such capacity will be adequate for planned
production in 1999. The Company's major capital projects and planned capital
expenditures for 1999 are described in Part II, Item 7, Page 14.
The Company also owns or leases sales offices in many large metropolitan areas
throughout the United States and Canada. Lease commitments are included in Part
II, Item 8, Page 36.
Item 3. Legal Proceedings.
The Company is involved in contractual disputes, environmental, administrative
and legal proceedings and investigations of various types. Although any
litigation, proceeding or investigation has an element of uncertainty, the
Company believes that the outcome of any proceeding, lawsuit or claim which is
pending or threatened, or all of them combined, will not have a significant
adverse effect on its consolidated financial position. The Company's contingent
liabilities are discussed in Part II, Item 8, Page 44.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company did not submit any matters to a vote of security holders during the
fourth quarter of 1998 through a solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the names of all executive officers of the Company, the
offices held by them, the year they first became an executive officer of the
Company and their ages:
First
Became
Name Office Held an Officer Age
Leonard A. Hadley Chairman and
Chief Executive Officer 1979 64
Lloyd D. Ward President and Chief Operating
Officer 1996 50
Gerald J. Pribanic Executive Vice President and Chief
Financial Officer 1996 55
William L. Beer President, Maytag Appliances 1998 46
Robert W. Downing President, Dixie-Narco, Inc. 1996 62
Keith G. Minton President, The Hoover Company 1998 51
Senior Vice President, General
Edward H. Graham Counsel and Assistant Secretary 1990 63
John M. Dupuy Vice President, Strategic Planning 1996 42
7<PAGE>
Jon O. Nicholas Vice President, Human Resources 1993 59
David D. Urbani Vice President and Treasurer 1995 53
Steven H. Wood Vice President, Financial Reporting
and Audit 1996 41
The executive officers were elected to serve in the indicated office until the
organizational meeting of the Board of Directors following the annual meeting of
shareholders on May 13, 1999 or until their successors are elected.
Each of the executive officers has served the Company in various executive or
administrative positions for at least five years except for:
Name Company/Position Period
Lloyd D. Ward PepsiCo, Inc. - President, Central
Division, Frito-Lay, Inc. 1992-1996
John M. Dupuy A. T. Kearney - Principal Consultant 1993-1995
Booz, Allen & Hamilton - Principal
Consultant 1985-1993
David D. Urbani Air Products and Chemicals, Inc.
- Assistant Treasurer 1984-1994
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Dividends
Sale Price of Common Shares Per Share
1998 1997 1998 1997
Quarter High Low High Low
First $50 3/8 $35 7/16 $23 3/4 $19 3/4 $.16 $.16
Second 55 3/4 47 1/2 27 3/4 20 1/8 .16 .16
Third 52 3/4 41 1/2 34 5/16 26 3/16 .18 .16
Fourth 64 1/2 39 5/8 37 1/2 30 7/16 .18 .16
The principal U.S. market in which the Company's common stock is traded is the
New York Stock Exchange. As of March 1, 1999, the Company had 34,396
shareowners of record.
8<PAGE>
Item 6. Selected Financial Data.
Dollars in thousands
except per share data 1998(1) 01997 (2) 1996 (3) 1995 (4) 1994(5)
Net sales $4,069,290 $3,407,911 $3,001,656 $3,039,524 $3,372,515
Gross profit 1,181,627 936,288 821,443 788,908 876,450
Percent of sales 29.0% 27.5% 27.4% 26.0% 26.0%
Operating income $ 522,738 $ 358,273 $ 269,079 $ 288,234 $ 322,768
Percent of sales 12.8% 10.5% 9.0% 9.5% 9.6%
Income (loss) from
continuing operations $ 286,510 $ 183,490 $ 137,977 $ (14,996)$ 151,137
Percent of sales 7.0% 5.4% 4.6% (.5%) 4.5%
Basic earnings
(loss) per share $ 3.12 $ 1.90 $ 1.36 $ (0.14)$ 1.42
Diluted earnings
(loss) per share 3.05 1.87 1.35 (0.14) 1.41
Dividends paid per
share 0.68 0.64 0.56 0.515 0.50
Basic weighted-average
shares outstanding 91,941 96,565 101,727 106,734 106,485
Diluted weighted-
average shares
outstanding 93,973 98,055 102,466 107,486 106,957
Working capital $ 178,165 $ 368,079 $ 334,948 $ 543,431 $ 595,703
Depreciation of
property, plant and
equipment 135,519 127,497 101,912 102,572 110,044
Capital expenditures 161,251 229,561 219,902 152,914 84,136
Total assets 2,587,663 2,514,154 2,329,940 2,125,066 2,504,327
Long-term debt, less
current portion 446,505 549,524 488,537 536,579 663,205
Total debt to
capitalization 58.0% 52.1% 51.2% 45.9% 50.7%
(1) Excludes the extraordinary loss on the early retirement of debt.
(2) Net sales include $31.3 million of sales from the Company's acquisition of
G.S. Blodgett Corporation, a commercial cooking equipment manufacturer, in the
fourth quarter of 1997. Excludes the extraordinary loss on the early retirement
of debt.
(3) Net sales include $40.4 million of sales from the Company's acquisition of a
50.5 percent ownership in a joint venture of home appliances in China in the
third quarter of 1996. Operating profit includes a $40 million charge for the
restructuring of the Company's major home appliance business. The after-tax
charge for this restructuring of $24.4 million is included in income (loss) from
continuing operations. Excludes the extraordinary loss on the early retirement
of debt.
(4) Net sales include $181.2 million made by the Company's European Operations
which was sold effective June 30, 1995. Income (loss) from continuing
operations includes a $135.4 million after-tax loss on the sale of the Company's
European Operations; a $9.9 million after-tax charge to settle a lawsuit
relating to the closing of the former Dixie-Narco plant in Ranson, West
Virginia; a $3.6 million after-tax loss on the sale of the Eastlake Operation;
and a $10.8 million after-tax loss arising from a guarantee of indebtedness
relating to the sale of one its manufacturing plants in 1992. Excludes the
extraordinary loss on the early retirement of debt.
9<PAGE>
(5) Net sales include $399 million made by the Company's European Operations
which was sold effective June 30, 1995 and $142 million made by the Company's
Australian Operations which was sold effective December 31, 1994. Income (loss)
from continuing operations includes a $20 million one-time tax benefit
associated with European operating losses and reorganization costs and a $16.4
million after-tax loss from the sale of the Company's Australian Operations.
Excludes the cumulative effect of an accounting change.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
COMPARISON OF 1998 WITH 1997
The Company has three reportable segments: home appliances, commercial
appliances and international appliances. (See further discussion and financial
information about the Company's reportable segments in "Segment Reporting"
section of the Notes to Consolidated Financial Statements.)
Net Sales: The Company's consolidated net sales for 1998 increased 19 percent
compared to 1997. Net sales in 1998 included sales of G.S. Blodgett Corporation
("Blodgett"), a manufacturer of commercial cooking equipment, which was acquired
by the Company on October 1, 1997. Excluding Blodgett, the Company's net sales
increased 16 percent in 1998 compared to 1997.
Home appliances net sales increased 15 percent in 1998 compared to 1997.
Net sales were up from the prior year due to the introduction of new products,
including new lines of Maytag Neptune laundry products, Maytag refrigerators,
Maytag cooking products, Hoover upright vacuum cleaners and Hoover upright deep
carpet cleaners. In addition, net sales were up from the prior year due to the
volume associated with shipments to Sears, Roebuck and Co. in connection with
the Company's agreement to begin selling the full line of Maytag brand major
appliances through Sears stores in the U.S. beginning in February 1998. The
Company's net sales also benefited from the significant volume growth in
industry shipments of major appliances in 1998 compared to 1997.
Net sales of commercial appliances were up 84 percent from 1997. This net
sales increase was primarily driven by a significant increase in the sales
volume of Dixie-Narco enhanced capacity venders introduced in 1997 and the
inclusion of Blodgett's results for a full year. Excluding Blodgett, net sales
increased 48 percent from 1997.
International appliances net sales increased 5 percent in 1998 compared to
1997. The sales increase was primarily attributable to higher unit volume
partially offset by price reductions on selected models in response to
competitive conditions in China.
Gross Profit: The Company's consolidated gross profit as a percent of sales
increased to 29 percent in 1998 from 27.5 percent in 1997.
Home appliances gross margins increased in 1998 compared to 1997, due to
the increase in sales volume, favorable brand and product sales mix, lower raw
material costs and the absence of production start-up costs associated with the
Company's new line of refrigerators which were incurred in 1997.
Commercial appliances gross margins increased in 1998 compared to 1997, due
to the increase in sales volume, partially offset by inefficiencies from the
reorganization of manufacturing operations at Blodgett.
International appliances gross margins decreased in 1998 compared to 1997
primarily from the decrease in selling prices on selected models.
The Company realized slightly lower raw material prices in 1998 compared to
1997 and expects raw material prices in 1999 to be approximately the same to
slightly lower than 1998 levels.
10<PAGE>
Selling, General and Administrative Expenses: Selling, general and
administrative expenses were 16.2 percent of sales in 1998 compared to 17
percent of sales in the same period in 1997. The decrease as a percent of sales
was primarily due to the operating leverage obtained on fixed expenses with the
increase in net sales despite the increase in expenses incurred in 1998 compared
to 1997.
Operating Income: Consolidated operating income increased 46 percent to $523
million, or 12.8 percent of sales, compared to $358 million, or 10.5 percent of
sales in 1997.
Home appliances operating income increased 44 percent in 1998 compared to
1997. Operating margin for 1998 was 14.5 percent of sales compared to 11.6
percent of sales in 1997. The increase in operating margin was due to the
increase in gross profit margins and decrease in selling, general and
administrative expenses as a percent of sales discussed above.
Commercial appliances operating income, which includes Blodgett for all of
1998, increased 156 percent in 1998 compared to 1997. Operating margin for 1998
was 10.9 percent of sales compared to 7.8 percent of sales in 1997. The
increase in operating margins was primarily due to the increase in gross profit
margins described above.
International appliances operating income decreased 49 percent in 1998
compared to 1997. Operating margin for 1998 was 4.6 percent of sales compared
to 9.4 percent of sales in 1997. The decrease in operating margins was due to
the decrease in gross profit margins discussed above and an increase in selling,
general and administrative expense due to both spending increases and an
additional provision for accounts receivable. There are many uncertainties
associated with the economic environment in China and the entire Asian region
which may adversely impact future operations.
Interest Expense: Interest expense increased 6 percent in 1998 compared to 1997
primarily due to lower capitalized interest. The Company's higher average
borrowings were offset by lower interest rates.
Income Taxes: The effective tax rate for 1998 was 37.4 percent compared to 36.5
percent in 1997. The increase in the effective tax rate was primarily due to
1997 including a $2 million one-time benefit from the resolution of certain
Internal Revenue Service issues as well as a reduced benefit in 1998 from
Rongshida-Maytag's tax holiday in China due to lower income before taxes. These
increases in the 1998 effective tax rate were partially offset by other tax
initiatives.
Extraordinary Item: In 1998, the Company retired $71.1 million of long-term
debt at a cost of $5.9 million after-tax. In 1997, the Company retired $61.8
million of long-term debt at a cost of $3.2 million after-tax.
Net Income: Net income for 1998 was $281 million, or $2.99 diluted earnings per
share, compared to net income of $180 million, or $1.84 diluted earnings per
share in 1997. Net income and diluted earnings per share were impacted by
special charges for the early retirement of debt in both years. The after-tax
charges for the early retirement of debt were $5.9 million and $3.2 million for
1998 and 1997, respectively.
Excluding these special charges in both years, income for 1998 would have
been $287 million, or $3.05 diluted earnings per share, compared to $183
million, or $1.87 diluted earnings per share for 1997. The increase in net
income was primarily due to the increase in operating income. The increase in
diluted earnings per share was due to the increase in net income and the
positive impact of $0.15 per share from the Company's share repurchase program.
(See discussion of the share repurchase program in "Liquidity and Capital
11<PAGE>
Resources" section of this Management's Discussion and Analysis.)
Comparison of 1997 with 1996
Net Sales: The Company's consolidated net sales for 1997 increased 14 percent
compared to 1996. Net sales in 1997 included a full year of sales of Rongshida-
Maytag compared to four months of sales included in 1996 when the Company
entered into the joint venture. In addition, net sales in 1997 included three
months of Blodgett which was acquired by the Company on October 1, 1997.
Excluding the impact of these acquisitions, the Company's net sales increased 10
percent in 1997 compared to 1996.
Home appliances net sales increased 9 percent in 1997 compared to 1996.
Net sales of major appliances were up from the previous year primarily due to
the introduction of a newly designed line of Maytag Neptune laundry products,
the redesigned line of Maytag top-mount refrigerators, strong sales of Performa
by Maytag laundry products and an increase in sales of exports of major
appliances partially offset by a decrease in private label sales. Net sales of
floor care products were up from 1996 primarily due to the introduction of a
newly designed line of Hoover upright vacuum cleaners and new models of Hoover
upright deep carpet cleaners.
Net sales of commercial appliances were up 54 percent from 1996. Excluding
Blodgett, net sales increased 34 percent from 1996. The increase in sales was
driven by a significant increase in domestic vender sales partially offset by a
decrease in export vender sales and glass front merchandiser sales. The
increase in domestic vender sales was due to the introduction of a new extended
depth vender in addition to depressed sales volume in 1996 resulting from
product transition difficulties.
Gross Profit: The Company's consolidated gross profit as a percent of sales
increased to 27.5 percent in 1997 from 27.4 percent in 1996.
Home appliances gross margins increased in 1997 primarily due to favorable
brand and product sales mix and manufacturing cost savings resulting from the
1996 restructuring of the Company's major appliance operations. (See discussion
of the restructuring in "Restructuring Charge" section of this Management's
Discussion and Analysis.) These increases in gross margins were partially
offset by production start-up costs associated with the Company's redesigned
line of top-mount refrigerators and an increase in distribution costs related to
the transition to regional distribution centers.
Commercial appliances gross margins increased in 1997 compared to 1996 due
to the increase in production volume from the increase in net sales and the
additional manufacturing start-up costs associated with the new Dixie-Narco
extended depth vender incurred in 1996.
Selling, General and Administrative Expenses: Consolidated selling, general and
administrative expenses were 17 percent of sales in 1997 compared to 17.1
percent of sales in 1996. The decrease was driven by the operating leverage
obtained on fixed expenses with the increase in sales in 1997 partially offset
by additional advertising and sales promotion expenses to support new product
introductions and from an increase in the provision for accounts receivable.
Restructuring Charge: During the first quarter of 1996, the Company recorded a
restructuring charge of $40 million, or $24.4 million after-tax, primarily
related to the costs associated with the consolidation of activities and
facilities related to the manufacture of cooking products and consolidation of
activities of two separate major appliance organizational units. (See
discussion of the restructuring in "Restructuring Charge" section of the Notes
to Consolidated Financial Statements.)
The Company incurred $10.5 million of additional restructuring costs during
12<PAGE>
1996, not included in the restructuring charge, which were charged to operations
as incurred.
Operating Income: The Company's consolidated operating income for 1997 was 10.5
percent of sales compared to 9 percent of sales in 1996. However, excluding the
$40 million restructuring charge, operating income in 1996 was 10.3 percent of
sales.
Excluding the $40 million restructuring charge recorded in 1996, operating
income for the home appliances segment was 11 percent higher in 1997 than 1996.
Operating income for 1997 was 11.6 percent of sales compared to 11.3 percent of
sales in 1996. The increase in operating margin is primarily due to the
increase in gross profit margins discussed previously.
Commercial appliances operating income increased to 7.8 percent of sales in
1997 compared to 6.6 percent of sales in 1996. Operating income increased from
the previous year primarily due to the increase in gross profit discussed
previously.
Interest Expense: Interest expense increased 37 percent from 1996 due to an
increase in short-term borrowings, interest expense related to Rongshida-Maytag,
lower capitalized interest and interest expense associated with the Company's
interest rate swap program. The interest rate swap interest expense is
partially offset by marked to market unrealized gains which are reflected in
Other-net in the Consolidated Statements of Income.
Income Taxes: The effective tax rate for 1997 was 36.5 percent compared to 39
percent in 1996. The decrease is primarily due to savings from the Company's
state and local tax initiatives, a lower tax rate for Rongshida-Maytag as a
result of its qualification for a tax holiday in China in 1997 and a $2 million
one-time benefit in 1997 from the resolution of certain Internal Revenue Service
issues.
Extraordinary Item: In 1997, the Company retired $61.8 million of long-term
debt at a cost of $3.2 million after-tax. In 1996, the Company retired $17.5
million of long-term debt at a cost of $1.5 million after-tax.
Net Income: Net income for 1997 was $180.3 million, or $1.84 diluted earnings
per share, compared to net income of $136.4 million, or $1.33 diluted earnings
per share in 1996. Net income and diluted earnings per share were impacted by
special charges in both years. Special charges in 1997 included the $3.2
million after-tax charge for the early retirement of debt. Special charges in
1996 included the $24.4 million after-tax restructuring charge and the $1.5
million after-tax charge for the early retirement of debt.
Excluding these special charges in both years, income for 1997 would have
been $183.5 million, or $1.87 diluted earnings per share, compared to $162.4
million, or $1.58 diluted earnings per share for 1996. The increase in income
is primarily due to the increase in operating income partially offset by the
increase in interest expense. The increase in diluted earnings per share in
1997 compared to 1996, excluding special charges, was due to the increase in
income and the positive impact of $0.12 per share from the Company's share
repurchase program. (See discussion of the share repurchase program in
"Liquidity and Capital Resources" section of this Management's Discussion and
Analysis.)
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash provided by operating
activities and borrowings. Detailed information on the Company's cash flows is
13<PAGE>
presented in the Consolidated Statements of Cash Flows.
Net Cash Provided by Operating Activities: Cash flow provided by operating
activities primarily consists of net income adjusted for certain non-cash items,
changes in working capital items, changes in pension assets and liabilities, and
changes in the liability for postretirement benefits. Certain non-cash items
include depreciation and amortization and deferred income taxes. Working
capital items consists primarily of accounts receivable, inventories, other
current assets and other current liabilities.
Net cash provided by operating activities in 1998 increased from 1997 as a
result of an increase in net income and a decrease in working capital.
A portion of the Company's accounts receivable is concentrated among major
national retailers. A significant loss of business with any of these national
retailers could have an adverse impact on the Company's ongoing operations.
Total Investing Activities: The Company continually invests in its businesses
for new product designs, cost reduction programs, replacement of equipment,
capacity expansion and government mandated product requirements.
Capital expenditures in 1998 were $161 million compared to $230 million in
1997. The lower capital spending was due to the completion of several major
capital projects in 1997. Planned capital expenditures for 1999 are
approximately $190 million.
In 1997, the Company acquired all of the outstanding shares of Blodgett, a
manufacturer of commercial ovens, fryers and charbroilers for the food service
industry, for $96.4 million. In connection with the purchase, the Company also
incurred transaction costs of $4.2 million and retired debt of approximately
$53.2 million. As a result, the total cost of business acquired was $148.3
million, net of cash acquired of $5.5 million. The Company funded this
acquisition through cash provided by operating activities and borrowings. The
results of the operations of the acquired business have been included in the
consolidated financial statements since the date of acquisition.
In 1996, the Company invested $35 million ($29.6 million, net of cash
acquired) to acquire a 50.5 percent ownership in Rongshida-Maytag, a
manufacturer of home appliances in China. The Company also committed additional
cash investments of approximately $35 million, of which $7 million, $19 million
and $9 million were contributed in 1998, 1997 and 1996, respectively. The
results of its operations have been included in the consolidated financial
statements since the date of acquisition. The Company's joint venture partner
also committed additional cash investments of approximately $35 million, of
which $7 million, $19 million and $9 million were contributed in 1998, 1997 and
1996, respectively.
Total Financing Activities: Dividend payments on the Company's common stock in
1998 were $62.6 million, or $.68 per share, compared to $61.7 million, or $.64
per share in 1997.
In 1997, the Company's board of directors authorized the repurchase of up
to 15 million additional shares beyond the previous share repurchase
authorizations totalling 15.8 million shares. Under these authorizations, the
Company has repurchased 22.1 million shares at a cost of $675 million, which
includes 6.3 million shares purchased at a cost of $318 million during 1998. As
of December 31, 1998, of the 8.7 million shares which may be repurchased under
then existing board authorization, the Company is committed to purchase 4
million shares under put options contracts, if such options are exercised. (See
discussion of these put option contracts below.) The Company plans to continue
the repurchase of shares over a non-specified period of time.
During the first quarter of 1998, the Company amended the forward stock
purchase agreement associated with the repurchase of 4 million shares by the
Company during 1997. The future contingent purchase price adjustment included
14<PAGE>
in the forward stock purchase agreement was amended to provide for settlement
based on the difference in the market price of the Company's common stock at the
time of settlement compared to the market price of the Company's common stock as
of March 24, 1998 rather than as of August 20, 1997. The net cost of the
amendment was $64 million. During the third quarter of 1998, the Company
further amended the forward stock purchase agreement to establish the future
settlement price on 1 million of the total 4 million shares. The forward stock
purchase contract allows the Company to determine the method of settlement. The
Company's objective in this transaction is to reduce the average price of
repurchased shares.
In connection with the share repurchase program, the Company sells put
options which give the purchaser the right to sell shares of the Company's
common stock to the Company at specified prices upon exercise of the options.
The put option contracts allow the Company to determine the method of
settlement. The Company's objective in selling put options is to reduce the
average price of repurchased shares. In 1998 and 1997, the Company received $30
million and $10 million, respectively, in premium proceeds from the sale of put
options. As of December 31, 1998, there were put options outstanding for 4
million shares with strike prices ranging from $43.25 to $56.838 (the weighted-
average strike price was $51.92).
In the third quarter of 1997, the Company and a wholly-owned subsidiary of
the Company contributed intellectual property and know-how with an appraised
value of $100 million and other assets with a market value of $54 million to
Anvil Technologies LLC ("LLC"), a newly formed Delaware limited liability
company. An outside investor purchased from the Company a non-controlling,
member interest in the LLC for $100 million. The Company's objective in this
transaction was to raise low-cost, equity funds. For financial reporting
purposes, the results of the LLC (other than those which are eliminated in
consolidation) are included in the Company's consolidated financial statements.
The outside investor's noncontrolling interest is reflected in Minority interest
in the Consolidated Balance Sheets. The income attributable to the
noncontrolling interest is reflected in Minority interest in the Consolidated
Statements of Income.
Any funding requirements for future investing and financing activities in
excess of cash on hand and generated from operations are planned to be
supplemented by borrowings. (See discussion of long-term debt issuances in
"Long-Term Debt" section of the Notes to Consolidated Financial Statements.)
The Company's commercial paper program is supported by a credit agreement with a
consortium of banks which provides revolving credit facilities totalling $400
million. This agreement expires June 29, 2001 and includes covenants for
interest coverage and leverage, with which the Company was in compliance at
December 31, 1998.
Market Risks
The Company is exposed to foreign currency exchange risk inherent in its
anticipated sales and assets and liabilities denominated in foreign currencies.
To mitigate the short-term effects of changes in exchange rates on the Company's
foreign currency denominated export sales, the Company enters into foreign
currency forward and option contracts. The Company's policy is to hedge a
portion of its anticipated foreign currency denominated export sales
transactions, which are primarily denominated in Canadian dollars, for periods
not exceeding twelve months.
At December 31, 1998, the result of a uniform 10 percent strengthening of
the U.S. dollar relative to the foreign currencies in which the Company's sales
are denominated would result in a decrease in net income of approximately $3
million for the year ended December 31, 1999. The Company's sensitivity
analysis of the effects of changes in foreign currency exchange rates does not
15<PAGE>
factor in potential changes in sales levels or local currency prices.
The Company also is exposed to interest rate risk in the Company's debt and
the commodity price risk inherent in the Company's purchase of certain
commodities used in the manufacture of its products. The Company has performed
sensitivity analyses assuming a hypothetical adverse movement in interest rates
and commodity prices. These analyses indicated that such market movements would
not have a material effect on the Company's financial position or results of
operations.
Year 2000
The much publicized "Year 2000 problem," affecting most companies, arises
because many existing computer programs use only the last two digits to refer to
a year. Therefore, these computer programs do not properly recognize a year
that begins with "20" instead of the familiar "19." If not corrected, these
computer applications could fail or create erroneous results. The global extent
of the potential impact of the Year 2000 problem is not yet known, and if not
timely corrected, it could affect the economy and the Company. The Company uses
computer information systems and manufacturing equipment which may be affected.
It also relies on suppliers and customers who are also dependent on systems and
equipment which use date dependent software.
In 1996, the Company began its effort for the conversion or replacement of
North American computer information systems which did not properly address the
Year 2000. This effort involved both plans for creating replacement systems for
those computer information systems which were developed internally as well as
obtaining versions of software purchased from third parties which are Year 2000
ready. The Company estimates that this effort is approximately 85 percent
complete as of December 31, 1998. The Company essentially has converted or
replaced its critical computer information systems for its North American
business operations. The remaining effort primarily relates to the conversion
or replacement of Blodgett's computer information systems and other non-critical
computer information systems which the Company expects to complete by mid-1999.
In mid-1997, the Company began to review the manufacturing equipment used
in the Company s North American operations as well as the systems related to the
infrastructure of the North American manufacturing and office facilities. The
Company is continuing to inventory and verify Year 2000 readiness of computer
controlled manufacturing equipment and computer controls for the North American
manufacturing and office facilities. The Company estimates that this effort is
approximately 75 percent complete as of December 31, 1998. The Company expects
to complete the remediation efforts of its production equipment and systems
related to its infrastructure for its North American business operations by mid-
1999.
In 1997, the Company also began to assess the Year 2000 problem remediation
efforts of third parties in North America who have material relationships with
the Company including, but not limited to: providers of services such as
utilities, suppliers of raw materials and customers where there is a significant
business relationship. However, there is no assurance that the Company will not
be affected by the Year 2000 problems of other organizations.
Rongshida-Maytag, the Company's joint venture in China, is currently
reviewing the implications of the Year 2000 problem on computer information
systems and equipment used in the manufacture of its products or facilities.
The remediation effort required for the computer information systems and
equipment for Rongshida-Maytag has not yet been identified.
The costs associated with the Company's Year 2000 remediation are being
expensed as incurred, are not material to the performance of the Company for
previous periods and are not expected to be material relative to the future
performance of the Company. The Company estimates it has spent approximately
$12 million to date on the Year 2000 issue and expects to spend not more than
16<PAGE>
$20 million in total on the Year 2000 issue. As previously identified, the
Company utilizes software which was acquired from third parties. The Company
has maintenance agreements with certain of its software vendors which, in return
for annual contractual payments, enable it to obtain new software releases,
including versions which are Year 2000 ready.
If the Company is unsuccessful, or if the remediation efforts of its key
suppliers or customers are unsuccessful with regard to Year 2000 remediation,
there may be a material adverse impact on the Company's financial position and
results of operations. If the Company's Year 2000 remediation effort is not
successful, the most likely worst case scenario is that the Company will be
unable to manufacture and distribute its products. The Company is unable to
estimate the financial impact of Year 2000 issues because it cannot predict the
magnitude or time length of potential Year 2000 business interruptions. The
Company s contingency plan continues to be under development and includes such
precautionary measures as an anticipated increased level of inventory to
minimize the potential disruption in the Company s ability to manufacture and
distribute products.
While the Company expects its Year 2000 issues to be remedied successfully,
it cannot guarantee that Year 2000 issues, including those of third parties,
will not have an adverse effect on the Company's consolidated financial position
or results of operations.
Contingencies
The Company has contingent liabilities arising in the normal course of business,
including pending litigation, environmental remediation, taxes and other claims.
(See discussion of these contingent liabilities in "Commitments and
Contingencies" section of the Notes to Consolidated Financial Statements.)
Subsequent Events
In February 1999, the Company's board of directors authorized the repurchase of
up to 10 million additional shares beyond the previous share repurchase
authorizations totaling 30.8 million shares. The Company plans to continue the
repurchase of shares over a non-specified period of time. (See discussion of
previous share repurchase authorizations in "Liquidity and Capital Resources"
section of this Management's Discussion and Analysis.)
In the first quarter of 1999, the Company acquired all of the outstanding
shares of Jade Range, a manufacturer of commercial ranges and refrigerators and
residential ranges for approximately $20 million in cash and stock. This
business has annual sales of approximately $20 million. The acquisition will be
accounted for as a purchase and the results of its operations will be included
in the consolidated financial statements from the date of acquisition.
Forward-Looking Statements
This Management's Discussion and Analysis contains statements which are not
historical facts and are considered "forward-looking" within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are identified by their use of terms such as "expects," "intends,"
"may impact," "plans" or "should." These forward-looking statements involve a
number of risks and uncertainties that may cause actual results to differ
materially from expected results. These risks and uncertainties include, but
are not limited to, the following: business conditions and growth of industries
in which the Company competes, including changes in economic conditions in the
geographic areas where the Company's operations exist or products are sold;
timing and start-up of newly designed products; shortages of manufacturing
17<PAGE>
capacity; competitive factors, such as price competition and new product
introductions; significant loss of business from a major national retailer; the
ability of the Company and customers and suppliers to become Year 2000 ready in
a timely manner; the cost and availability of raw materials and purchased
components; progress on capital projects; the impact of business acquisitions or
dispositions; the costs of complying with governmental regulations; level of
share repurchases; litigation and other risk factors.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Quantitative and qualitative disclosures about market risk are discussed in
"Market Risks" section of the Management's Discussion and Analysis (Part II,
Item 7, pages 15-16)
Item 8. Financial Statements and Supplementary Data.
Page
Report of Independent Auditors . . . . . . . . . . . . . . 19
Consolidated Statements of Income--Years Ended
December 31, 1998, 1997, and 1996 . . . . . . . . . . . . 20
Consolidated Balance Sheets--
December 31, 1998 and 1997 . . . . . . . . . . . . . . . 21
Consolidated Statements of Shareowners' Equity--Years Ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 23
Consolidated Statements of Comprehensive Income--
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 24
Consolidated Statements of Cash Flows--Years Ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . 26
Quarterly Results of Operations--Years 1998 and 1997 . . . 47
18<PAGE>
Report of Independent Auditors
Shareowners and Board of Directors
Maytag Corporation
We have audited the accompanying consolidated balance sheets of Maytag
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, comprehensive income, shareowners' equity,
and cash flows for each of three years in the period ended December 31, 1998.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and related schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and related schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Maytag
Corporation and subsidiaries at December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Chicago, Illinois
February 2, 1999
19<PAGE>
Consolidated Statements of Income
Year Ended December 31
In thousands except per share data 1998 1997 1996
Net sales $4,069,290 $3,407,911 $3,001,656
Cost of sales 2,887,663 2,471,623 2,180,213
Gross profit 1,181,627 936,288 821,443
Selling, general and administrative
expenses 658,889 578,015 512,364
Restructuring charge 40,000
Operating income 522,738 358,273 269,079
Interest expense (62,765) (58,995) (43,006)
Other - net 10,912 1,277 2,164
Income before income taxes, minority
interest and extraordinary item 470,885 300,555 228,237
Income taxes 176,100 109,800 89,000
Income before minority interest and
extraordinary item 294,785 190,755 139,237
Minority interest (8,275) (7,265) (1,260)
Income before extraordinary item 286,510 183,490 137,977
Extraordinary item - loss on early
retirement of debt (5,900) (3,200) (1,548)
Net income $ 280,610 $ 180,290 $ 136,429
Basic earnings (loss) per common share:
Income before extraordinary item $ 3.12 $ 1.90 $ 1.36
Extraordinary item - loss on early
retirement of debt (0.06) (0.03) (0.02)
Net income 3.05 1.87 1.34
Diluted earnings (loss) per common share:
Income before extraordinary item $ 3.05 $ 1.87 $ 1.35
Extraordinary item - loss on early
retirement of debt (0.06) (0.03) (0.02)
Net income 2.99 1.84 1.33
See notes to consolidated financial statements.
20<PAGE>
Consolidated Balance Sheets
December 31
In thousands except share data 1998 1997
Assets
Current assets
Cash and cash equivalents $ 28,642 $ 27,991
Accounts receivable, less allowance for doubtful
accounts (1998--$22,305; 1997--$36,386) 472,979 473,741
Inventories 383,753 350,209
Deferred income taxes 39,014 46,073
Other current assets 44,474 36,703
Total current assets 968,862 934,717
Noncurrent assets
Deferred income taxes 120,273 118,931
Prepaid pension cost 1,399 2,160
Intangible pension asset 62,811 33,819
Other intangibles, less allowance for amortization
(1998--$98,106; 1997--$85,071) 424,312 433,595
Other noncurrent assets 44,412 49,660
Total noncurrent assets 653,207 638,165
Property, plant and equipment
Land 19,317 19,597
Buildings and improvements 333,032 309,960
Machinery and equipment 1,499,872 1,427,276
Construction in progress 102,042 59,376
1,954,263 1,816,209
Less accumulated depreciation 988,669 874,937
Total property, plant and equipment 965,594 941,272
Total assets $2,587,663 $2,514,154
See notes to consolidated financial statements.
21<PAGE>
December 31
In thousands except share data 1998 1997
Liabilities and Shareowners' Equity
Current liabilities
Notes payable $ 112,898 $ 112,843
Accounts payable 279,086 221,417
Compensation to employees 81,836 62,758
Accrued liabilities 176,701 161,344
Current portion of long-term debt 140,176 8,276
Total current liabilities 790,697 566,638
Noncurrent liabilities
Deferred income taxes 21,191 23,666
Long-term debt, less current portion 446,505 549,524
Postretirement benefit liability 460,599 454,390
Accrued pension cost 69,660 31,308
Other noncurrent liabilities 117,392 99,096
Total noncurrent liabilities 1,115,347 1,157,984
Minority interest 174,055 173,723
Shareowners' equity
Preferred stock:
Authorized--24,000,000 shares (par value $1.00)
Issued--none
Common stock:
Authorized--200,000,000 shares (par value $1.25)
Issued--117,150,593 shares, including shares in
treasury 146,438 146,438
Additional paid-in capital 467,192 494,646
Retained earnings 760,115 542,118
Cost of common stock in treasury (1998--27,932,506
shares; 1997--22,465,256 shares) (805,802) (508,115)
Employee stock plans (45,331) (48,416)
Accumulated other comprehensive income (15,048) (10,862)
Total shareowners' equity 507,564 615,809
Total liabilities and shareowners' equity $2,587,663 $2,514,154
See notes to consolidated financial statements.
22<PAGE>
Consolidated Statements of Shareowners' Equity
December 31
In thousands 1998 1997 1996
Common stock
Balance at beginning of year $ 146,438 $ 146,438 $ 146,438
Balance at end of year 146,438 146,438 146,438
Additional paid-in capital
Balance at beginning of year 494,646 471,158 472,602
Stock issued under stock option plans (5,596) (7,375) (2,324)
Stock issued under restricted stock
awards, net 1,426 (86) (176)
Additional ESOP shares issued 308 (139) (264)
Tax benefit of ESOP dividends and stock
options 9,994 6,640 1,320
Forward stock purchase contract premium 14,592
Forward stock purchase contract
amendment (63,782)
Put option premiums 30,196 9,856
Balance at end of year 467,192 494,646 471,158
Retained earnings
Balance at beginning of year 542,118 423,552 344,346
Net income 280,610 180,290 136,429
Dividends on common stock (62,613) (61,724) (57,223)
Balance at end of year 760,115 542,118 423,552
Treasury stock
Balance at beginning of year (508,115) (405,035) (255,663)
Purchase of common stock for treasury (318,139) (138,051) (164,439)
Stock issued under stock option plans 18,779 29,309 8,435
Stock issued under restricted stock
awards, net 1,226 3,212 3,951
Additional ESOP shares issued 447 2,450 2,681
Balance at end of year (805,802) (508,115) (405,035)
Employee stock plans
Balance at beginning of year (48,416) (55,204) (57,319)
Stock issued under restricted stock
awards, net (445) 7 310
ESOP shares allocated 3,530 6,781 1,805
Balance at end of year (45,331) (48,416) (55,204)
Accumulated other comprehensive income
Minimum pension liability adjustment
Balance at beginning of year (107) (5,656)
Adjustment for the year 107 5,549
Balance at end of year (107)
Unrealized losses on securities
Balance at beginning of year (3,605)
Adjustment for the year (1,257) (3,605)
Balance at end of year (4,862) (3,605)
Foreign currency translation
Balance at beginning of year (7,257) (6,812) (7,397)
Translation adjustments (2,929) (445) 585
Balance at end of year (10,186) (7,257) (6,812)
Accumulated other comprehensive income
balance at beginning of year (10,862) (6,919) (13,053)
Total adjustments for the year (4,186) (3,943) 6,134
Accumulated other comprehensive
income balance at end of year (15,048) (10,862) (6,919)
Total shareowners' equity $ 507,564 $ 615,809 $ 573,990
See notes to consolidated financial statements.
23<PAGE>
Consolidated Statements of Comprehensive Income
Year Ended December 31
In thousands 1998 1997 1996
Net income $ 280,610 $ 180,290 $ 136,429
Other comprehensive income items, net of
income taxes
Unrealized losses on securities (1,257) (3,605)
Minimum pension liability adjustment 107 5,549
Foreign currency translation (2,929) (445) 585
Total other comprehensive income (4,186) (3,943) 6,134
Comprehensive income $ 276,424 $ 176,347 $ 142,563
See notes to consolidated financial statements.
24<PAGE>
Consolidated Statements of Cash Flows
Year Ended December 31
In thousands 1998 1997 1996
Operating activities
Net income $ 280,610 $ 180,290 $ 136,429
Adjustments to reconcile net income to
net cash provided by operating
activities:
Extraordinary item - loss on early
retirement of debt 5,900 3,200 1,548
Minority interest 8,275 7,265 1,260
Depreciation and amortization 148,554 138,163 111,279
Deferred income taxes 3,242 (7,956) (15,341)
Changes in working capital items
exclusive of business acquisitions:
Accounts receivable 1,502 4,631 (14,234)
Inventories (28,015) (5,393) (41,158)
Other current assets (13,475) 2,281 15,124
Other current liabilities 93,257 4,047 37,899
Restructuring charge, net of cash
expenditures (2,560) (4,869) 26,735
Pension assets and liabilities 10,121 18,124 (12,129)
Postretirement benefit liability 6,209 5,952 18,937
Other - net 26,258 11,930 (1,456)
Net cash provided by operating
activities 539,878 357,665 264,893
Investing activities
Capital expenditures (161,251) (229,561) (219,902)
Investment in securities (10,015)
Business acquisitions, net of cash
acquired (148,283) (29,625)
Total investing activities (161,251) (387,859) (249,527)
Financing activities
Proceeds from issuance of notes payable 14,687 60,493 34,094
Repayment of notes payable (20,880) (3,142)
Proceeds from issuance of long-term debt 102,922 133,015 26,536
Repayment of long-term debt (75,743) (124,123) (20,500)
Debt repurchase premiums (5,900) (3,200) (1,548)
Stock repurchases (318,139) (138,051) (164,439)
Forward stock purchase amendment (63,782)
Stock options exercised and other common
stock transactions 52,643 52,308 6,795
Dividends (70,537) (65,243) (57,223)
Proceeds from sale of LLC member
interest 100,000
Investment by joint venture partner 6,900 18,975 8,625
Proceeds from interest rate swaps 38,038
Total financing activities (377,829) 31,032 (129,622)
Effect of exchange rates on cash (147) (390) 585
Increase (decrease) in cash and
cash equivalents 651 448 (113,671)
Cash and cash equivalents at beginning
of year 27,991 27,543 141,214
Cash and cash equivalents at end of year $ 28,642 $ 27,991 $ 27,543
See notes to consolidated financial statements.
25<PAGE>
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
> Principles of Consolidation: The consolidated financial statements include
the accounts and transactions of the Company and its wholly-owned and majority-
owned subsidiaries. Intercompany accounts and transactions have been eliminated
in consolidation.
Exchange rate fluctuations from translating the financial statements of
subsidiaries located outside the United States into U.S. dollars are recorded in
accumulated other comprehensive income in shareowners' equity. All other
foreign exchange gains and losses are included in income.
> Reclassifications: Certain previously reported amounts have been reclassified
to conform with the current period presentation.
> Use of Estimates: The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.
> Cash and Cash Equivalents: Highly liquid investments with a maturity of three
months or less when purchased are considered by the Company to be cash
equivalents.
> Inventories: Inventories are stated at the lower of cost or market.
Inventory costs are determined by the last-in, first-out (LIFO) method for
approximately 80 percent and 86 percent of the Company's inventories at December
31, 1998 and 1997, respectively. Costs for other inventories have been
determined principally by the first-in, first-out (FIFO) method.
> Income Taxes: Income taxes are accounted for using the asset and liability
approach in accordance with FASB Statement No. 109, "Accounting for Income
Taxes." Such approach results in the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the book carrying amounts and the tax basis of assets and liabilities.
> Intangibles: Intangibles principally represent goodwill, which is the cost of
business acquisitions in excess of the fair value of identifiable net tangible
assets acquired. Goodwill is amortized over 40 years using the straight-line
method and the carrying value is reviewed for impairment annually. If this
review indicates that goodwill is not expected to be recoverable based on the
undiscounted cash flows of the entity acquired over the remaining amortization
period, the Company's carrying value of the goodwill will be reduced.
> Property, Plant and Equipment: Property, plant and equipment is stated on the
basis of cost. Depreciation expense is calculated principally on the straight-
line method to amortize the cost of the assets over their estimated economic
useful lives. The estimated useful lives are 15 to 45 years for buildings and
improvements and five to 20 years for machinery and equipment.
> Environmental Expenditures: The Company accrues for losses associated with
environmental remediation obligations when such losses are probable and
reasonably estimable. Accruals for estimated losses from environmental
remediation obligations generally are recognized no later than completion of the
remedial feasibility study. Such accruals are adjusted as further information
develops or circumstances change. Costs of future expenditures for
environmental remediation obligations are not discounted to their present value.
26<PAGE>
> Revenue Recognition and Product Warranty Costs: Revenue from sales of
products is generally recognized upon shipment to customers. Estimated product
warranty costs are recorded at the time of sale and periodically adjusted to
reflect actual experience.
> Advertising and Sales Promotion: All costs associated with advertising and
promoting products are expensed in the period incurred.
> Financial Instruments: The Company uses foreign exchange forward and option
contracts to manage certain foreign currency exchange rate risks associated with
its international operations. The outstanding contracts are marked to market
each period with the gains and losses included in income.
The Company has interest rate swap contracts outstanding which are marked
to market each period with the gains and losses included in income.
The Company has a forward stock purchase contract outstanding in its own
shares which allows the Company to determine whether the contract is settled in
cash or shares. As such, the contract is considered an equity instrument and
changes in fair value are not recognized in the Company's financial statements.
If the Company determines to settle the contract in cash, the amount of cash
paid or received would be reported as a reduction of, or an addition to, paid-in
capital.
The Company has put option contracts outstanding in its own shares which
allow the Company to determine whether the contracts are settled in cash or
shares. As such, the contracts are considered equity instruments and changes in
fair value are not recognized in the Company's financial statements. The
premiums received from the sale of put options are recorded as an addition to
paid-in capital. If the Company determines to settle the contracts in cash, the
amount of cash paid would be reported as a reduction of paid-in capital.
> Stock-Based Compensation: The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25), and related interpretations in accounting for its employee stock options
and awards. Under APB 25, no compensation expense is recognized when the
exercise price of options equals the fair value (market price) of the underlying
stock on the date of grant.
> Earnings Per Common Share: Basic and diluted earnings per share is calculated
in accordance with FASB Statement No. 128, "Earnings Per Share." Basic EPS is
computed by dividing net income by the weighted-average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution from
the exercise or conversion of securities, such as stock options, into common
stock. All EPS amounts for all periods have been presented, and where
necessary, restated to conform to Statement 128 requirements.
> Comprehensive Income: In 1998, the Company adopted FASB Statement No. 130,
"Reporting Comprehensive Income." Statement 130 establishes new rules for the
reporting and displaying of comprehensive income and its components; however,
the adoption of this Statement had no impact on the Company s net income or
shareowners equity. Statement 130 requires unrealized losses on the Company s
available-for-sale securities, minimum pension liability adjustments and foreign
currency translation adjustments to be included in accumulated other
comprehensive income, which prior to adoption were reported separately in
shareowners equity. Prior year financial statements have been reclassified and
Consolidated Statements of Comprehensive Income have been added to conform to
the requirements of Statement 130.
> Impact of Recently Issued Accounting Standards: In June 1998, the FASB issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
27<PAGE>
Activities." The Company expects to adopt the new Statement effective January
1, 2000. Statement 133 will require the Company to recognize all derivatives on
the consolidated balance sheet at fair value. The Company does not anticipate
that the adoption of Statement 133 will have a significant effect on its results
of operations or financial position.
Business Acquisitions
In the fourth quarter of 1998, Rongshida-Maytag acquired all of the outstanding
shares of Three-Gorges, a manufacturer of home laundry products in China. This
business produces and markets home laundry equipment and has annual sales of
approximately $15 million. In connection with the purchase, Rongshida-Maytag
assumed $8 million in notes payable and long-term debt. This acquisition has
been accounted for as a purchase, and the results of its operations have been
included in the consolidated financial statements since the date of acquisition.
The excess of purchase price (assumed notes payable and long-term debt) over the
fair values of net assets acquired was approximately $2 million and has been
recorded as Other intangibles (goodwill) in the Consolidated Balance Sheets and
is being amortized on a straight-line basis over 40 years.
On October 1, 1997, the Company acquired all of the outstanding shares of
G.S. Blodgett Corporation, a manufacturer of commercial ovens, fryers and
charbroilers for the food service industry, for $96.4 million. In connection
with the purchase, the Company also incurred transaction costs of $4.2 million
and retired debt of approximately $53.2 million. As a result, the total cost of
the business acquired was $148.3 million, net of cash acquired of $5.5 million.
The Company funded this acquisition through cash provided by operating
activities and borrowings. This business, which has annual sales of
approximately $135 million, produces and markets commercial cooking equipment
primarily under the Blodgett and Pitco Frialator brands. This acquisition has
been accounted for as a purchase, and the results of its operations have been
included in the consolidated financial statements since the date of acquisition.
The excess of purchase price over the fair values of net assets acquired was
approximately $120 million and has been recorded as Other intangibles (goodwill)
in the Consolidated Balance Sheets and is being amortized on a straight-line
basis over 40 years.
In the third quarter of 1996, the Company invested $35 million ($29.6
million, net of cash acquired) to acquire a 50.5 percent ownership in Rongshida-
Maytag, a manufacturer of home appliances in China. The Company also committed
additional cash investments of approximately $35 million, of which $7 million,
$19 million and $9 million was contributed in 1998, 1997 and 1996, respectively.
This acquisition has been accounted for as a purchase, and the results of its
operations have been included in the consolidated financial statements since the
date of acquisition. The excess of purchase price over the fair values of net
assets acquired was approximately $33 million and has been recorded as Other
intangibles (goodwill) in the Consolidated Balance Sheets and is being amortized
on a straight-line basis over 40 years.
Assuming the 1998 and 1997 acquisitions had occurred January 1, 1997,
consolidated net sales would have been $4.1 billion for 1998 and $3.5 billion
for 1997. Consolidated pro forma income and earnings per share would not have
been materially different from the reported amounts for 1998 and 1997. Assuming
the 1997 and 1996 acquisitions had occurred January 1, 1996, consolidated net
sales would have been $3.5 billion for 1997 and $3.1 billion for 1996.
Consolidated pro forma income and earnings per share would not have been
materially different from the reported amounts for 1997 and 1996. Such
unaudited pro forma amounts are not indicative of what the actual consolidated
results of operations might have been if the acquisitions had been effective at
the beginning of January 1, 1997 and January 1, 1996, respectively.
Restructuring Charge
28<PAGE>
During the first quarter of 1996, the Company announced the restructuring of its
major appliance operations in an effort to strengthen its position in the
industry and to deliver improved performance to both customers and shareowners.
This included the consolidation of two separate organizational units into a
single operation responsible for all activities associated with the manufacture
and distribution of the Company's brands of major appliances and the closing of
a cooking products plant in Indianapolis, Indiana, with transfer of that
production to an existing plant in Cleveland, Tennessee.
As a result of these actions, the Company recorded a 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 manufacturing activities and consolidation of activities of the
two separate organizational units.
The $40 million restructuring charge was comprised of cash expenditures of
$22 million, primarily related to severance, and non-cash charges of $18
million, primarily related to write-offs of property, plant and equipment.
During 1998, the Company incurred $3 million of costs which were primarily cash
expenditures charged to the restructuring reserve. During 1997, the Company
incurred $18 million of costs, of which $5 million were cash expenditures
charged to the restructuring reserve. During 1996, the Company incurred $18
million of costs, of which $13 million were cash expenditures charged to the
restructuring reserve. The remaining costs to be incurred are holding costs
associated with the Indianapolis, Indiana plant pending the sale of the facility
by the Company.
Inventories
Inventories consisted of the following:
December 31
In thousands 1998 1997
Raw materials $ 69,039 $ 74,436
Work in process 66,578 64,838
Finished goods 317,331 284,195
Supplies 8,856 8,130
Total FIFO cost 461,804 431,599
Less excess of FIFO cost over LIFO 78,051 81,390
Inventories $ 383,753 $ 350,209
29<PAGE>
Income Taxes
Deferred income taxes reflect the expected future tax consequences of temporary
differences between the book carrying amounts and the tax basis of assets and
liabilities.
Deferred tax assets and liabilities consisted of the following:
December 31
In thousands 1998 1997
Deferred tax assets (liabilities):
Book/tax basis differences $ (63,940) $ (54,301)
Postretirement benefit liability 180,349 177,823
Product warranty/liability accruals 30,092 23,715
Pensions and other employee benefits 20,879 13,567
Advertising and sales promotion accruals 9,868 11,400
Interest rate swaps 11,620 13,838
Other - net (4,805) 1,072
184,063 187,114
Less valuation allowance for deferred tax assets 45,967 45,776
Net deferred tax assets $ 138,096 $ 141,338
Recognized in Consolidated Balance Sheets:
Deferred tax assets - current $ 39,014 $ 46,073
Deferred tax assets - noncurrent 120,273 118,931
Deferred tax liabilities - noncurrent (21,191) (23,666)
Net deferred tax assets $ 138,096 $ 141,338
Income before income taxes, minority interest and extraordinary item
consisted of the following:
Year Ended December 31
In thousands 1998 1997 1996
United States $ 469,061 $ 287,498 $ 216,248
Non-United States 1,824 13,057 11,989
$ 470,885 $ 300,555 $ 228,237
Components of the provision (benefit) for income taxes consisted of
the following:
Year Ended December 31
In thousands 1998 1997 1996
Current provision (benefit):
Federal $ 157,900 $ 86,300 $ 99,500
State 21,500 11,200 19,200
Non-United States (100) 2,200 4,100
179,300 99,700 122,800
Deferred provision (benefit):
Federal (2,800) 8,400 (29,000)
State (400) 1,700 (5,500)
Non-United States 700
(3,200) 10,100 (33,800)
Provision for income taxes $ 176,100 $ 109,800 $ 89,000
30<PAGE>
The reconciliation of the United States federal statutory tax rate to
the Company's effective tax rate consisted of the following:
Year Ended December 31
1998 1997 1996
U.S. statutory rate applied to income
before minority interest and
extraordinary item 35.0% 35.0% 35.0%
Increase (reduction) resulting from:
Utilization of capital loss
carryforward (9.6) (6.1)
Deferred tax asset valuation
allowance 9.6 4.3
Amortization of goodwill 0.9 1.1 1.4
Difference due to minority interest (0.7) (0.8)
State income taxes, net of federal
tax benefit 2.9 2.8 3.9
Tax credits arising outside the
United States (0.4)
Other - net (0.7) (1.6) 0.9
Effective tax rate 37.4% 36.5% 39.0%
Since the Company plans to continue to finance expansion and operating
requirements of subsidiaries outside the United States through reinvestment of
the undistributed earnings of these subsidiaries (approximately $14 million at
December 31, 1998), taxes which would result from distribution have only been
provided on the portion of such earnings estimated to be distributed in the
future. If such earnings were distributed beyond the amount for which taxes
have been provided, additional taxes payable would be eliminated substantially
by available tax credits arising from taxes paid outside the United States.
Income taxes paid, net of refunds received, during 1998, 1997 and 1996 were
$154 million, $107 million and $102 million, respectively.
The tax effects of the components of comprehensive income, unrealized
losses on securities and foreign currency translation adjustments, were recorded
as deferred tax assets with a corresponding valuation allowance. The Company
believes the realization of unrealized losses on securities and foreign currency
translation adjustments would be classified as capital losses for tax purposes
and no capital gain would be available to the Company to utilize the losses.
Notes Payable
Notes payable at December 31, 1998 consisted of notes payable to foreign banks
of $59.8 million and commercial paper borrowings of $53.1 million. The weighted
average interest rate on all notes payable to foreign banks and commercial paper
borrowings was 7.0 percent at December 31, 1998. Notes payable at December 31,
1997 consisted of notes payable to foreign banks of $38.9 million and commercial
paper borrowings of $73.9 million. The weighted average interest rate on all
notes payable to foreign banks and commercial paper borrowings was 7.4 percent
at December 31, 1997.
The Company's commercial paper program is supported by a credit agreement
with a consortium of banks which provides revolving credit facilities totalling
$400 million. This agreement expires June 29, 2001 and includes covenants for
interest coverage and leverage which the Company was in compliance with at
December 31, 1998.
31<PAGE>
Long-Term Debt
Long-term debt consisted of the following:
December 31
In thousands 1998 1997
Notes payable with interest payable semiannually:
Due May 15, 2002 at 9.75% $ 125,358 $ 147,425
Due July 15, 1999 at 8.875% 116,820 148,550
Medium-term notes, maturing from 2000 to 2010, from
5.30% to 9.03% with interest payable semiannually 125,230 126,500
Medium-term notes, maturing from 1999 to 2009, with
interest adjusted each quarter based on LIBOR and
payable quarterly 160,000 75,000
Employee stock ownership plan notes payable
semiannually through July 2, 2004 at 5.13% 42,360 45,890
Other 16,913 14,435
586,681 557,800
Less current portion of long-term debt 140,176 8,276
Long-term debt $ 446,505 $ 549,524
The 9.75 percent notes due in 2002, the 8.875 percent notes due in 1999 and
the medium-term notes grant the holders the right to require the Company to
repurchase all or any portion of their notes at 100 percent of the principal
amount thereof, together with accrued interest, following the occurrence of both
a change of Company control and a credit rating decline to below investment
grade.
Interest paid during 1998, 1997 and 1996 was $64 million, $65.1 million and
$51.1 million, respectively. When applicable, the Company capitalizes interest
incurred on funds used to construct property, plant and equipment. Interest
capitalized during 1997 and 1996 was $4.2 million and $8.9 million,
respectively. Interest capitalized during 1998 was not significant.
The aggregate maturities of long-term debt in each of the next five years
and thereafter are as follows (in thousands): 1999--$140,176; 2000--$95,444;
2001--$24,508; 2002--$133,489; 2003--$43,290; thereafter--$149,774.
In 1998, the Company issued a $16 million medium-term note with a fixed
interest rate of 5.30 percent due September 29, 2000. The Company also issued a
$70 million medium-term note with a floating rate based on LIBOR with the
interest rate reset quarterly due May 10, 2000. The Company also issued a $15
million medium-term note with a floating rate based on LIBOR due December 3,
1999. The three-month LIBOR rate as of December 31, 1998 was 5.07 percent.
In 1998, the Company made early retirements of debt of $71.1 million at an
after-tax cost of $5.9 million (net of income tax benefit of $3.5 million).
Included in this amount was $22.1 million of the 9.75 percent notes due May 15,
2002, $31.7 million of the 8.875 percent notes due July 15, 1999 and $17.3
million of medium-term notes.
In 1997, the Company issued a $75 million medium-term note maturing in 2009
which has an interest rate based on LIBOR through November 1999. In 1999, the
interest rate for the remaining 10 years of the note will be established at the
Company's then borrowing rate for 10-year notes based on the greater of the then
current year treasury rate or 5.91 percent. In 1997, the Company also reissued
$49.3 million of 5.13 percent employee stock ownership plan notes.
In 1997, the Company made early retirements of debt of $61.8 million at an
after-tax cost of $3.2 million (net of income tax benefit of $2.0 million).
Included in this amount was $12.5 million of the 9.75 percent notes due May 15,
2002 and $49.3 million of 9.35 percent employee stock ownership plan notes.
In 1996, the Company made early retirements of debt of $17.5 million of the
9.75 percent notes due May 15, 2002 at an after-tax cost of $1.5 million (net of
income tax benefit of $1.0 million). In 1996, the Company also issued $25
32<PAGE>
million of 7.22 percent medium-term notes maturing in 2006.
The 1998, 1997 and 1996 charges for the early retirement of debt have been
reflected in the Consolidated Statements of Income as extraordinary items.
Accrued Liabilities
Accrued liabilities consisted of the following:
December 31
In thousands 1998 1997
Warranties $ 46,162 $ 37,732
Advertising and sales promotion 59,036 42,227
Other 71,503 81,385
Accrued liabilities $ 176,701 $ 161,344
Pension Benefits
The Company provides noncontributory defined benefit pension plans for most
employees. Plans covering salaried and management employees generally provide
pension benefits that are based on an average of the employee's earnings and
credited service. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. The Company's funding policy for the
plans is to contribute amounts sufficient to meet the minimum funding
requirement of the Employee Retirement Income Security Act of 1974, plus any
additional amounts which the Company may determine to be appropriate.
The reconciliation of the beginning and ending balances of the projected
benefit obligation, reconciliation of the beginning and ending balances of the
fair value of plan assets, funded status of plans and amounts recognized in the
Consolidated Balance Sheets consisted of the following:
December 31
In thousands 1998 1997
Change in projected benefit
obligation:
Benefit obligation at beginning
of year $ 983,705 $ 905,031
Service cost 22,223 19,628
Interest cost 69,615 66,550
Amendments 18,977
Actuarial loss 65,333 36,652
Acquisition 18,556
Benefits paid (65,362) (62,364)
Curtailments/settlements 431
Other (foreign currency) (638) (348)
Benefit obligation at end of year 1,094,284 983,705
Change in plan assets:
Fair value of plan assets at
beginning of year 892,326 798,575
Actual return of plan assets 106,479 133,420
Acquisition 18,877
Employer contribution 13,905 4,233
Benefits paid (65,362) (62,364)
Other (foreign currency) (733) (415)
Fair value of plan assets at end
of year 946,615 892,326
Funded status of plan (147,669) (91,379)
Unrecognized actuarial loss 69,915 38,357
Unrecognized prior service cost 83,460 74,039
Unrecognized transition assets (11,156) (16,346)
33<PAGE>
Net amount recognized $ (5,450) $ 4,671
Amounts recognized in the
Consolidated Balance Sheets
consisted of:
Prepaid pension cost $ 1,399 $ 2,160
Intangible pension asset 62,811 33,819
Accrued pension cost (69,660) (31,308)
Net pension asset (liability) $ (5,450) $ 4,671
Assumptions used in determining net periodic pension cost for the plans in
the United States consisted of the following:
1998 1997 1996
Discount rates 7.25% 7.50% 7.50%
Rates of increase in compensation levels 5.00% 5.00% 5.00%
Expected long-term rate of return on assets 9.50% 9.50% 9.50%
For the valuation of projected benefit obligation at December 31, 1998 set
forth in the table above, and for determining net periodic pension cost in 1999,
the discount rate was decreased to 6.75 percent and the rate of compensation was
decreased to 4.5 percent. Assumptions for plans outside the United States are
comparable to the above in all periods.
The components of net periodic pension cost consisted of the following:
Year Ended December 31
In thousands 1998 1997 1996
Components of net periodic pension
cost:
Service cost $ 22,223 $ 19,628 $ 19,637
Interest cost 69,615 66,550 63,828
Expected return on plan assets (74,979) (70,301) (67,316)
Amortization of transition assets (4,798) (5,097) (5,050)
Amortization of prior service
cost 10,059 10,078 9,709
Recognized actuarial loss 867 794 1,465
Curtailments/settlements 936 387 2,694
Net periodic pension cost $ 23,923 $ 22,039 $ 24,967
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $1,085,044, $1,006,848 and $937,283, respectively,
as of December 31, 1998, and $954,300, $891,378 and $860,207, respectively, as
of December 31, 1997.
The Company acquired all of the outstanding shares of G.S. Blodgett
Corporation on October 1, 1997, including its pension plans. The Company
consolidated G.S. Blodgett Corporation's pension plans with its existing plans
in 1998. (See discussion of this acquisition in "Business Acquisitions" section
of the Notes to Consolidated Financial Statements.)
The Company amended its pension plans in 1998 to include several benefit
improvements for plans covering salaried and hourly employees.
34<PAGE>
Postretirement Benefits
The Company provides postretirement health care and life insurance benefits for
certain employee groups in the U.S. Most of the postretirement plans are
contributory and contain certain other cost sharing features such as deductibles
and coinsurance. The plans are unfunded. Employees do not vest and these
benefits are subject to change. Death benefits for certain retired employees
are funded as part of, and paid out of, pension plans.
The reconciliation of the beginning and ending balances of the accumulated
benefit obligation, reconciliation of the beginning and ending balances of the
fair value of plan assets, funded status of plans and amounts recognized in the
Consolidated Balance Sheets consisted of the following:
December 31
In thousands 1998 1997
Change in accumulated benefit
obligation:
Benefit obligation at beginning
of year $ 381,690 $ 377,489
Service cost 12,895 12,491
Interest cost 26,613 26,588
Actuarial loss (gain) 25,590 (13,470)
Benefits paid (22,544) (21,408)
Benefit obligation at end of year 424,244 381,690
Change in plan assets:
Fair value of plan assets at
beginning of year -- --
Employer contribution 22,544 21,408
Benefits paid (22,544) (21,408)
Fair value of plan assets at end
of year -- --
Funded status of plan (424,244) (381,690)
Unrecognized actuarial gain (26,491) (53,861)
Unrecognized prior service cost (9,864) (18,839)
Postretirement benefit liability $ (460,599) $ (454,390)
Assumptions used in determining net periodic postretirement benefit cost
consisted of the following:
1998 1997 1996
Health care cost trend rates(1):
Current year 6.50% 7.00% 8.50%
Decreasing gradually to the year 2001 and
remaining thereafter 5.00% 5.00% 6.00%
Discount rates 7.25% 7.50% 7.50%
(1) Weighted-average annual assumed rate of increase in the per capita cost of
covered benefits.
For the valuation of accumulated benefit obligation at December 31, 1998
set forth in the table above, and for determining net postretirement benefit
costs in 1999, the discount rate was decreased to 6.75 percent and the health
care cost trend rates were assumed to be 6.0 percent for 1999 decreasing
gradually to 5.0 percent in the year 2001 and remaining thereafter.
The components of net periodic postretirement cost consisted of the
following:
35<PAGE>
Year Ended December 31
In thousands 1998 1997 1996
Components of net periodic
postretirement cost:
Service cost $ 12,895 $ 12,491 $ 15,453
Interest cost 26,613 26,588 28,498
Amortization of prior service
cost (8,975) (10,168) (8,130)
Recognized actuarial gain (1,780) (1,550)
Net periodic postretirement cost $ 28,753 $ 27,361 $ 35,821
The assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage change in assumed
health care cost trend rates effect consisted of the following:
1-Percentage- 1-Percentage-
Point Point
In thousands Increase Decrease
Effect on total of
postretirement service
and interest cost
components $ 5,895 $ (5,148)
Effect on postretirement
benefit obligation 45,606 (41,194)
Leases
The Company leases buildings, machinery, equipment and automobiles under
operating leases. Rental expense for operating leases amounted to $25.9
million, $23.3 million and $22.1 million for 1998, 1997 and 1996, respectively.
Future minimum lease payments for operating leases as of December 31,
1998 consisted of the following:
Year Ending In thousands
1999 $ 13,573
2000 10,585
2001 6,785
2002 5,157
2003 4,561
Thereafter 4,847
Total minimum lease payments $ 45,508
Financial Instruments
The Company's foreign currency exchange rate risk includes anticipated sales and
assets and liabilities denominated in currencies other than the U.S. dollar.
The Company uses foreign exchange forward and option contracts to manage certain
foreign currency exchange rate risks associated with its international
operations. The counterparties to the contracts are high credit quality
international financial institutions. During 1998, 1997 and 1996, the Company
used foreign exchange forward and option contracts for the exchange of Canadian
dollars to U.S. dollars to hedge the sale of appliances manufactured in the U.S.
and sold to Canadian customers. Gains and losses recognized from these
contracts were not significant. As of December 31, 1998, the Company had open
foreign currency forward contracts for the exchange of Canadian dollars, all
having maturities less than twelve months, in the amount of U.S. $70.4 million.
The fair market value of these contracts, which is estimated by using the
applicable spot or forward rates, was not significant. Open contracts as of
December 31, 1997 were not significant.
36<PAGE>
In 1996, the Company initiated a trading program of interest rate swaps
which it marks to market each period. The swap transactions involve the
exchange of Canadian variable interest and fixed interest rate instruments. The
counterparty is a single financial institution of the highest credit quality.
All swaps are executed under an International Swap and Derivatives Association,
Inc. (ISDA) master netting agreement. In 1996, the Company realized $38 million
of gains which were offset by unrealized losses of $40.6 million related to the
interest rate swaps. The net losses of $2.6 million are reflected in Other-net
in the Consolidated Statements of Income. In 1997, the Company incurred $7.6
million of interest expense in payment on the exchange position of these swap
transactions. Additionally, the Company recognized unrealized gains of $5.4
million which are reflected in Other-net in the Consolidated Statements of
Income. In 1998, the Company incurred $7.5 million of interest expense in
payment on the exchange position of these swap transactions. Additionally, the
Company recognized unrealized gains of $5.6 million which are reflected in
Other-net in the Consolidated Statements of Income.
As of December 31, 1998, the Company had five swap transactions outstanding
with a total notional amount of $80.1 million which mature by 2003. The fair
value of the swap positions of $29.7 million at December 31, 1998 and $35.3
million at December 31, 1997 is reflected in Other noncurrent liabilities in the
Consolidated Balance Sheets. The value of these individual swaps is dependent
upon movements in the Canadian and U.S. interest rates. As the portfolio of
interest rate swaps outstanding at December 31, 1998 is configured, there would
be no measurable impact on the net market value of the swap transactions
outstanding with any future changes in interest rates.
Financial instruments which subject the Company to concentrations of credit
risk primarily consist of accounts receivable from customers. The majority of
the Company s sales are derived from the home appliances segment which sells
predominantly to retailers. These retail customers range from major national
retailers to independent retail dealers and distributors. In some instances,
the Company retains a security interest in the product sold to customers. While
the Company has experienced losses in collection of accounts receivables due to
business failures in the retail environment, the assessed credit risk for
existing accounts receivable is provided for in the allowance for doubtful
accounts.
The Company used various assumptions and methods in estimating fair value
disclosures for financial instruments. The carrying amounts of cash and cash
equivalents, accounts receivable and notes payable approximated their fair value
due to the short maturity of these instruments. The fair values of long-term
debt were estimated based on quoted market prices, if available, or quoted
market prices of comparable instruments. The fair values of interest rate
swaps, the forward stock purchase contract and put option contracts were
estimated based on amounts the Company would pay to terminate the contracts at
the reporting date.
The carrying amounts and fair values of the Company's financial
instruments, consisted of the following:
37<PAGE>
December 31, 1998 December 31, 1997
Carrying Fair Carrying Fair
In thousands Amount Value Amount Value
Cash and cash equivalents $ 28,642 $ 28,642 $ 27,991$ 27,991
Accounts receivable 472,979 472,979 473,741 473,741
Notes payable 112,898 112,898 112,843 112,843
Long-term debt 586,681 620,230 557,800 594,255
Interest rate swaps 29,665 29,665 35,280 35,280
Forward stock purchase
contract 64,520 53,042
Put option contracts 4,054 1,090
For additional disclosures regarding the Company's notes payable, see Notes
Payable section in the Notes to Consolidated Financial Statements. For
additional disclosures regarding the Company's long-term debt, see Long-Term
Debt section in the Notes to Consolidated Financial Statements. For additional
disclosures regarding the Company's forward stock purchase contract and put
option contracts, see Shareowners' Equity section in the Notes to Consolidated
Financial Statements.
Minority Interest
In 1996, the Company invested approximately $35 million and committed additional
cash investments of approximately $35 million to acquire a 50.5 percent
ownership in Rongshida-Maytag, a manufacturer of home appliances in China. The
Company's joint venture partner also committed additional cash investments of
approximately $35 million, of which $7 million, $19 million and $9 million were
contributed in 1998, 1997 and 1996, respectively. The results of this majority-
owned joint venture in China are included in the Company's consolidated
financial statements. The noncontrolling interest attributable to the joint
venture as of December 31, 1998 and 1997 was $74 million and $73.7 million,
respectively, and is reflected in Minority interest in the Consolidated Balance
Sheets. The income attributable to the noncontrolling interest in the joint
venture in 1998, 1997 and 1996 was $0.8 million, $4 million and $1.3 million,
respectively, and is reflected in Minority interest in the Consolidated
Statements of Income.
In the third quarter of 1997, the Company and a wholly-owned subsidiary of
the Company contributed intellectual property and know-how with an appraised
value of $100 million and other assets with a market value of $54 million to
Anvil Technologies LLC ("LLC"), a newly formed Delaware limited liability
company. An outside investor purchased from the Company a noncontrolling,
member interest in the LLC for $100 million. The Company's objective in this
transaction was to raise low-cost, equity funds. For financial reporting
purposes, the results of the LLC (other than those which are eliminated in
consolidation) are included in the Company's consolidated financial statements.
The outside investor's noncontrolling interest of $100 million as of December
31, 1998 and 1997 is reflected in Minority interest in the Consolidated Balance
Sheets. The income attributable to the noncontrolling interest in 1998 and 1997
was $7.5 million and $3.3 million, respectively, and is reflected in Minority
interest in the Consolidated Statements of Income.
Stock Plans
The 1996 Employee Stock Incentive Plan provides that the Company may grant to
eligible employees stock options, restricted stock and other incentive awards.
Up to 6.5 million shares of common stock may be granted under the plan, of which
no more than 2.5 million shares may be granted as restricted stock. The vesting
period and terms of stock options granted are established by the Compensation
Committee of the board of directors. Generally, the options become exercisable
38<PAGE>
three years after the date of grant and have a maximum term of 10 years. There
are stock options and restricted stock outstanding that were granted under
previous plans with terms similar to the 1996 plan.
The Maytag Corporation 1989 Non-Employee Directors Stock Option Plan
authorizes the issuance of up to 250,000 shares of Common stock to the Company's
non-employee directors. Stock options under this plan are immediately
exercisable upon grant and generally have a maximum term of five years.
In the event of a change of Company control, all outstanding stock options
become immediately exercisable under the above described plans. There were
2,404,563 and 3,384,284 shares available for future stock grants at December 31,
1998 and 1997, respectively.
The Company has elected to follow APB 25, "Accounting for Stock Issued to
Employees," and recognizes no compensation expense for stock options as the
option price under the plan equals the fair market value of the underlying stock
at the date of grant. Pro forma information regarding net income and earnings
per share is required by FASB Statement No. 123, "Accounting for Stock-Based
Compensation," and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value of these stock options was estimated at the date of grant using a Black-
Scholes option pricing model.
The Company's weighted-average assumptions consisted of the following:
1998 1997 1996
Risk-free interest rate 5.08% 5.85% 6.03%
Dividend yield 1.13% 1.75% 2.80%
Stock price volatility factor 0.25 0.25 0.24
Weighted-average expected life (years) 5 5 5
Weighted-average fair value of options
granted $13.09 $8.67 $4.61
For purposes of pro forma disclosures, the estimated fair value of
options granted is amortized to expense over the options' vesting period. The
pro forma effect on net income is not representative of the pro forma effect on
net income in future years because grants made in 1996 and later years have an
increasing vesting period.
The Company's pro forma information consisted of the following:
In thousands except per share data 1998 1997 1996
Net income - as reported $280,610 $180,290 $136,429
Net income - pro forma 275,672 178,159 132,558
Basic earnings per share - as reported 3.05 1.87 1.34
Diluted earnings per share - as reported 2.99 1.84 1.33
Basic earnings per share - pro forma 3.00 1.84 1.30
Diluted earnings per share - pro forma 2.93 1.82 1.29
Stock option activity consisted of the following:
39<PAGE>
Average Option
Price Shares
Outstanding December 31, 1995 $ 16.47 3,965,298
Granted 19.34 1,933,330
Exercised 15.09 (394,371)
Exchanged for SAR 14.73 (4,610)
Canceled or expired 19.68 (103,276)
Outstanding December 31, 1996 17.54 5,396,371
Granted 30.87 1,284,460
Exercised 16.44 (1,424,657)
Exchanged for SAR 16.46 (3,305)
Canceled or expired 18.04 (30,230)
Outstanding December 31, 1997 21.12 5,222,639
Granted 46.39 912,195
Exercised 17.14 (755,083)
Exchanged for SAR 16.83 (520)
Canceled or expired 20.91 (75,180)
Outstanding December 31, 1998 $ 26.03 5,304,051
Exercisable options
December 31, 1996 $ 16.58 3,494,501
December 31, 1997 16.87 2,185,229
December 31, 1998 17.77 1,523,060
Information with respect to stock options outstanding and stock options
exercisable as of December 31, 1998 consisted of the following:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
$10.94-$16.88 583,955 4.4 $15.18 583,955 $15.18
$17.63-$24.63 2,630,405 7.4 18.91 906,105 18.20
$31.56-$42.88 1,208,441 8.9 31.81
$46.34-$51.91 881,250 9.5 46.55 33,000 51.91
5,304,051 1,523,060
Some stock options were granted with stock appreciation rights (SAR) which
entitle the employee to surrender the right to receive up to one-half of the
shares covered by the option and to receive a cash payment equal to the
difference between the stock option price and the market value of the shares
being surrendered. Stock options with a SAR outstanding were 69,465 at December
31, 1998, 122,850 at December 31, 1997 and 234,680 at December 31, 1996.
The Company issues restricted stock and stock units to certain executives
that vest over a three-year period based on achievement of pre-established
financial objectives. Restricted stock is paid out in shares and the stock
units are paid out in cash. Restricted stock shares outstanding at December 31,
1998, 1997 and 1996 were 311,960, 409,634 and 462,253, respectively. Restricted
stock units outstanding at December 31, 1998, 1997 and 1996 were 217,186,
289,272 and 283,600, respectively. The expense for the anticipated restricted
stock and stock unit payout is amortized over the three-year vesting period and
was $11.8 million, $7.6 million and $4.8 million in 1998, 1997 and 1996,
respectively. The number of shares of restricted stock issued in 1998 was
76,230 with a fair value at date of grant of $2.8 million. The number of stock
units issued in 1998 was 50,827 with a fair value at date of grant of $1.9
million.
40<PAGE>
Employee Stock Ownership Plan
The Company established an Employee Stock Option Plan (ESOP), and a related
trust issued debt and used the proceeds to acquire shares of the Company's stock
for future allocation to ESOP participants. ESOP participants generally consist
of all U.S. employees except a select group covered by a collective bargaining
agreement. The Company guarantees the ESOP debt and reflects it in the
Consolidated Balance Sheets as Long-term debt with a related amount shown in the
Shareowners' equity section as part of Employee stock plans. Dividends
earned on the allocated and unallocated ESOP shares are used to service the
debt. The Company is obligated to make annual contributions to the ESOP trust
to the extent the dividends earned on the shares are less than the debt service
requirements. As the debt is repaid, shares are released and allocated to plan
participants based on the ratio of the current year debt service payment to the
total debt service payments over the life of the loan. If the shares released
are less than the shares earned by the employees, the Company contributes
additional shares to the ESOP trust to meet the shortfall. All shares held by
the ESOP trust are considered outstanding for earnings per share computations
and dividends earned on the shares are recorded as a reduction of retained
earnings.
The ESOP shares held in trust consisted of the following:
December 31
1998 1997
Original shares held in trust:
Released and allocated 1,700,757 1,460,105
Unreleased shares (fair value; 1998--$71,985,029;
1997--$50,904,572) 1,156,386 1,397,038
2,857,143 2,857,143
Additional shares contributed and allocated 666,295 666,158
Shares withdrawn (514,211) (428,227)
Total shares held in trust 3,009,227 3,095,074
The components of the total contribution to the ESOP trust consisted of the
following:
Year Ended December 31
In thousands 1998 1997 1996
Debt service requirement $ 9,325 $ 9,831 $ 8,005
Dividends earned on ESOP shares (2,086) (1,960) (1,550)
Cash contribution to ESOP trust 7,239 7,871 6,455
FMV of additional shares contributed 6 726 2,312
Total contribution to ESOP trust $ 7,245 $ 8,597 $ 8,767
The components of expense recognized by the Company for the ESOP
contribution consisted of the following:
Year Ended December 31
In thousands 1998 1997 1996
Contribution classified as interest
expense $ 2,265 $ 4,636 $ 4,991
Contribution classified as compensation
expense 4,980 3,961 3,776
Total expense for the ESOP contribution $ 7,245 $ 8,597 $ 8,767
41<PAGE>
Shareowners' Equity
The share activity of the Company's common stock consisted of the following:
December 31
In thousands 1998 1997 1996
Common stock
Balance at beginning of period 117,151 117,151 117,151
Balance at end of period 117,151 117,151 117,151
Treasury stock
Balance at beginning of period (22,465) (19,106) (11,745)
Purchase of common stock for treasury (6,300) (5,000) (8,056)
Stock issued under stock option plans 760 1,374 390
Stock issued under restricted stock
awards, net 52 151 182
Additional ESOP shares issued 20 116 123
Balance at end of period (27,933) (22,465) (19,106)
In 1997, the Company's board of directors authorized the repurchase of up
to 15 million additional shares beyond the previous share repurchase
authorizations totalling 15.8 million shares. Under these authorizations, the
Company has repurchased 22.1 million shares at a cost of $675 million. As of
December 31, 1998, of the 8.7 million shares which may be repurchased under then
existing board authorization, the Company is committed to purchase 4 million
shares under put options contracts, if such options are exercised. (See
discussion of these put option contracts below.) The Company plans to continue
the repurchase of shares over a non-specified period of time.
During the first quarter of 1998, the Company amended the forward stock
purchase agreement associated with the repurchase of 4 million shares by the
Company during 1997. The future contingent purchase price adjustment included
in the forward stock purchase agreement was amended to provide for settlement
based on the difference in the market price of the Company's common stock at the
time of settlement compared to the market price of the Company's common stock as
of March 24, 1998 rather than as of August 20, 1997. The net cost of the
amendment was $64 million. During the third quarter of 1998, the Company
further amended the forward stock purchase agreement to establish the future
settlement price on 1 million of the total 4 million shares. The forward stock
purchase contract allows the Company to determine the method of settlement. The
Company's objective in this transaction is to reduce the average price of
repurchased shares.
In connection with the share repurchase program, the Company sells put
options which give the purchaser the right to sell shares of the Company's
common stock to the Company at specified prices upon exercise of the options.
The put option contracts allow the Company to determine the method of
settlement. The Company's objective in selling put options is to reduce the
average price of repurchased shares. In 1998 and 1997, the Company received $30
million and $10 million, respectively, in premium proceeds from the sale of put
options. As of December 31, 1998, there were put options outstanding for 4
million shares with strike prices ranging from $43.25 to $56.838 (the weighted-
average strike price was $51.92).
Pursuant to a Shareholder Rights Plan approved by the Company in 1998, each
share of common stock carries with it one Right. Until exercisable, the Rights
will not be transferable apart from the Company's common stock. When
exercisable, each Right will entitle its holder to purchase one one-hundredth of
a share of preferred stock of the Company at a price of $165. The Rights will
only become exercisable if a person or group acquires 20 percent (which may be
reduced to not less than 10 percent at the discretion of the board of directors)
or more of the Company's common stock. In the event the Company is acquired in
a merger or 50 percent or more of its consolidated assets or earnings power are
sold, each Right entitles the holder to purchase common stock of either the
42<PAGE>
surviving or acquired company at one-half its market price. The Rights may be
redeemed in whole by the Company at a purchase price of $.01 per Right. The
preferred shares will be entitled to 100 times the aggregate per share dividend
payable on the Company's common stock and to 100 votes on all matters submitted
to a vote of shareowners. The Rights expire May 2, 2008.
Supplementary Expense Information
Advertising costs and research and development expenses consisted of the
following:
Year Ended December 31
In thousands 1998 1997 1996
Advertising costs $ 168,483 $ 143,334 $ 138,141
Research and development expenses 59,468 50,201 48,927
Earnings Per Share
The computation of basic and diluted earnings per share consisted of the
following:
Year Ended December 31
In thousands except per share data 1998 1997 1996
Numerator:
Income before extraordinary item $ 286,510 $ 183,490 $ 137,977
Extraordinary item - loss on early
retirement of debt (5,900) (3,200) (1,548)
Numerator for basic and diluted
earnings per share - net income $ 280,610 $ 180,290 $ 136,429
Denominator:
Denominator for basic earnings per
share - weighted-average shares 91,941 96,565 101,727
Effect of dilutive securities:
Stock option plans 1,731 940 434
Restricted stock awards 196 190 305
Forward stock purchase contract 105 360
Dilutive potential common shares 2,032 1,490 739
Denominator for diluted earnings per
share - adjusted weighted-average
shares 93,973 98,055 102,466
Basic earnings per share $ 3.05 $ 1.87 $ 1.34
Diluted earnings per share $ 2.99 $ 1.84 $ 1.33
For additional disclosures regarding stock option plans and restricted
stock awards, see Stock Plans section in the Notes to Consolidated Financial
Statements. For additional disclosures regarding the Company's forward stock
purchase contract, see Shareowners' Equity section in the Notes to Consolidated
Financial Statements.
Environmental Remediation
The operations of the Company are subject to various federal, state and local
laws and regulations intended to protect the environment including regulations
related to air and water quality and waste handling and disposal. The Company
also has received notices from the U.S. Environmental Protection Agency, state
agencies and/or private parties seeking contribution, that it has been
identified as a "potentially responsible party" (PRP), under the Comprehensive
Environmental Response, Compensation and Liability Act, and may be required to
share in the cost of cleanup with respect to such sites. The Company s ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRPs and
their financial viability and the remediation methods and technology to be used.
43<PAGE>
The Company also has responsibility, subject to specific contractual terms, for
environmental claims for assets or businesses which have previously been sold.
While it is possible the Company s estimated undiscounted obligation of
approximately $8 million for future environmental costs may change in the near
term, the Company believes the outcome of these matters will not have a material
adverse effect on its consolidated financial position, results of operations or
cash flows. The accrual for environmental liabilities is reflected in Other
noncurrent liabilities in the Consolidated Balance Sheets.
Commitments and Contingencies
The Company has contingent liabilities arising in the normal course of business,
including pending litigation, environmental remediation, taxes and other claims.
The Company believes the outcome of these matters will not have a material
adverse effect on its consolidated financial position, results of operations or
cash flows.
At December 31, 1998, the Company has outstanding commitments for capital
expenditures of $22 million.
Segment Reporting
The Company has three reportable segments: home appliances, commercial
appliances and international appliances. The operations of the Company's home
appliances segment manufacture major appliances (laundry products, dishwashers,
refrigerators, cooking appliances) and floor care products. These products are
primarily sold to major national retailers and independent retail dealers in
North America and targeted international markets.
The operations of the Company's commercial appliances segment manufacture
commercial cooking and vending equipment. These products are primarily sold to
distributors, soft drink bottlers, restaurant chains and dealers in North
America and targeted international markets.
The international appliances segment consists of the Company's 50.5 percent
owned joint venture in China, Rongshida-Maytag, which manufactures laundry
products and refrigerators. These products are primarily sold to department
stores and distributors in China.
The Company's reportable segments are distinguished by the nature of
products manufactured and sold and types of customers. The Company's home
appliances segment has been further defined based on distinct geographical
locations.
The Company evaluates performance and allocates resources to reportable
segments primarily based on operating income. The accounting policies of the
reportable segments are the same as those described in the summary of
significant policies except that the Company allocates pension expense
associated with its pension plan to each reportable segment while recording the
pension assets and liabilities at corporate. In addition, the Company records
its federal and state deferred tax assets and liabilities at corporate.
Intersegment sales are not significant.
Financial information for the Company's reportable segments consisted of
the following:
44<PAGE>
Year Ended December 31
In thousands 1998 1997 1996
Net sales
Home appliances $3,482,842 $3,035,593 $2,798,907
Commercial appliances 458,008 249,416 162,301
International appliances 128,440 122,902 40,448
Consolidated total $4,069,290 $3,407,911 $3,001,656
Operating income
Home appliances $ 505,110 $ 351,665 $ 276,945
Commercial appliances 49,769 19,437 10,731
International appliances 5,939 11,605 3,802
Total for reportable segments 560,818 382,707 291,478
Corporate (38,080) (24,434) (22,399)
Consolidated total $ 522,738 $ 358,273 $ 269,079
Capital expenditures
Home appliances $ 126,019 $ 174,622 $ 216,321
Commercial appliances 9,044 7,412 2,694
International appliances 21,817 32,884 576
Total for reportable segments 156,880 214,918 219,591
Corporate 4,371 14,643 311
Consolidated total $ 161,251 $ 229,561 $ 219,902
Depreciation and amortization
Home appliances $ 129,712 $ 125,125 $ 104,768
Commercial appliances 9,781 5,666 3,820
International appliances 7,533 6,410 1,412
Total for reportable segments 147,026 137,201 110,000
Corporate 1,528 962 1,278
Consolidated total $ 148,554 $ 138,163 $ 111,278
Total assets
Home appliances $1,736,396 $1,753,109 $1,730,795
Commercial appliances 266,750 250,440 91,886
International appliances 255,361 220,089 189,362
Total for reportable segments 2,258,507 2,223,638 2,012,043
Corporate 329,156 290,516 317,897
Consolidated total $2,587,663 $2,514,154 $2,329,940
In 1996, the Company's home appliances segment recorded a restructuring
charge of $40 million. For additional disclosures regarding the Restructuring
Charge, see Restructuring Charge section in the Notes to Consolidated Financial
Statements.
Corporate assets includes such items as deferred tax assets, intangible
pension asset and other assets.
The reconciliation of segment profit to consolidated income before income
taxes and minority interest consisted of the following:
Year Ended December 31
In thousands 1998 1997 1996
Total operating income for reportable
segments $ 560,818 $ 382,707 $ 291,478
General corporate (38,080) (24,434) (22,399)
Interest expense (62,765) (58,995) (43,006)
Other - net 10,912 1,277 2,164
Consolidated income before income
taxes and minority interest $ 470,885 $ 300,555 $ 228,237
Financial information related to the Company's operations by geographic
area consisted of the following:
45<PAGE>
Year Ended December 31
In thousands 1998 1997 1996
Net sales
United States $3,601,790 $2,983,574 $2,674,127
China 128,440 122,902 40,448
Other foreign countries 339,060 301,435 287,081
Consolidated total $4,069,290 $3,407,911 $3,001,656
December 31
In thousands 1998 1997 1996
Long-lived assets
United States $ 867,425 $ 866,316 $ 804,770
China 90,080 67,964 40,616
Other foreign countries 8,089 6,992 6,499
Consolidated total $ 965,594 $ 941,272 $ 851,885
Net sales are attributed to countries based on the location of customers.
Long-lived assets consist of total property, plant and equipment.
46<PAGE>
Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations consisted of the following:
December September June March
In thousands except per share data 31 30 30 31
1998
Net sales $ 972,003 $1,035,202 $1,021,699 $1,040,386
Gross profit 291,791 298,817 287,118 303,901
Income before extraordinary item 68,816 77,440 67,987 72,267
Basic earnings per share 0.77 0.85 0.73 0.77
Diluted earnings per share 0.75 0.84 0.71 0.75
Net income 66,416 73,940 67,987 72,267
Basic earnings per share 0.74 0.82 0.73 0.77
Diluted earnings per share 0.72 0.80 0.71 0.75
1997
Net sales $ 945,097 $ 855,804 $ 814,541 $ 792,469
Gross profit 262,827 239,534 224,445 209,482
Income before extraordinary item 51,930 49,277 43,783 38,500
Basic earnings per share 0.55 0.51 0.45 0.39
Diluted earnings per share 0.54 0.50 0.44 0.39
Net income 48,730 49,277 43,783 38,500
Basic earnings per share 0.52 0.51 0.45 0.39
Diluted earnings per share 0.50 0.50 0.44 0.39
In the third quarter of 1998, the Company made early retirements of debt of
$50.5 million at an after-tax cost of $3.5 million. In the fourth quarter of
1998, the Company made early retirements of debt of $20.6 million at an after-
tax cost of $2.4 million. These charges for the early retirement of debt have
been reflected in the Consolidated Statements of Income as extraordinary items.
In the fourth quarter of 1997, the Company acquired G.S. Blodgett
Corporation, a commercial cooking equipment manufacturer. The results of this
operation are consolidated in the Company's financial statements beginning in
October 1997. Net sales from the acquisition of $31.3 million are included in
the quarter ended December 31, 1997. In the fourth quarter of 1997, the Company
made early retirements of debt of $61.8 million at an after-tax cost of $3.2
million. The charge for the early retirement of debt has been reflected in the
Consolidated Statements of Income as an extraordinary item.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information concerning directors and officers on pages 1 through 7 of the Proxy
Statement of the Company is incorporated herein by reference. Additional
information concerning executive officers of the Company is included under
"Executive Officers of the Registrant" included in Part I, Item 4.
Item 11. Executive Compensation.
Information concerning executive compensation on pages 13 through 22 of the
Proxy Statement, is incorporated herein by reference; provided that the
information contained in the Proxy Statement under the heading "Compensation
Committee Report on Executive Compensation" is specifically not incorporated
47<PAGE>
herein by reference. Information concerning director compensation on page 8 of
the Proxy Statement is incorporated herein by reference, provided that the
information contained in the Proxy Statement under the headings "Shareholder
Return Performance" and "Other Matters" is specifically not incorporated herein
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The security ownership of certain beneficial owners and management is
incorporated herein by reference from pages 5 through 7 of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Information concerning certain relationships and related transactions is
incorporated herein by reference from pages 1 through 4 of the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report in the "List of Financial
Statements and Financial Statement Schedules" on page 50.
(3) The response to this portion of Item 14 is submitted as a
separate section of this report in the "List of Exhibits" on
pages 51 through 54.
(b) There were no reports on Form 8-K filed during the fourth quarter ended
December 31, 1998.
(c) Exhibits--The response to this portion of Item 14 is submitted as a
separate section of this report in the "List of Exhibits" on pages 51
through 54.
(d) Financial Statement Schedules--The response to this portion of Item 14 is
submitted as a separate section of this report in the "List of Financial
Statements and Financial Statement Schedules" on page 50.
48<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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
(Registrant)
Leonard A. Hadley
Chairman and Chief Executive Officer
Director
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Gerald J. Pribanic Steven H. Wood
Executive Vice President and Vice President Financial Reporting
Chief Financial Officer and Audit and Chief Accounting Officer
Barbara R. Allen Howard L. Clark, Jr.
Director Director
Lester Crown Wayland R. Hicks
Director Director
Bernard G. Rethore W. Ann Reynolds
Director Director
Neele E. Stearns, Jr. Fred G. Steingraber
Director Director
Carole J. Uhrich
Director
Date: March 17, 1999
49<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 14(a)(1), (2) and (3), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
LIST OF EXHIBITS
FINANCIAL STATEMENT SCHEDULES
Year Ended December 31, 1998
MAYTAG CORPORATION
NEWTON, IOWA
FORM 10-K--ITEM 14(a)(1), (2) AND ITEM 14(d)
MAYTAG CORPORATION
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and supplementary data of Maytag
Corporation and subsidiaries are included in Part II, Item 8:
Page
Consolidated Statements of Income--Years Ended
December 31, 1998, 1997, and 1996 . . . . . . . . . . . . . 20
Consolidated Balance Sheets--
December 31, 1998 and 1997 . . . . . . . . . . . . . . . . 21
Consolidated Statements of Shareowners' Equity--Years Ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . 23
Consolidated Statements of Comprehensive Income--
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . 24
Consolidated Statements of Cash Flows--Years Ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . . 26
Quarterly Results of Operations--Years 1998 and 1997 . . . . 47
The following consolidated financial statement schedule of Maytag Corporation
and subsidiaries is included in Item 14(d):
Schedule II Valuation and Qualifying Accounts . . .. . . . . 55
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
50<PAGE>
FORM 10-K--ITEM 14(a) (3) AND ITEM 14(c)
MAYTAG CORPORATION
LIST OF EXHIBITS
The following exhibits are filed herewith or incorporated by reference. Items
indicated by (1) are considered a compensatory plan or arrangement required to
be filed pursuant to Item 14 of Form 10-K.
Incorporated Filed with
Exhibit Herein by Electronic
Number Description of Document Reference to Submission
3(a) Restated Certificate of Incorporation of 1993 Annual
Registrant. Report on
Form 10-K
3(b) Certificate of Designations of Series A 1988 Annual
Junior Participating Preferred Stock of Report on
Registrant. Form 10-K.
3(c) Certificate of Increase of Authorized 1988 Annual
Number of Shares of Series A Junior Report on
Participating Preferred Stock of Form 10-K.
Registrant.
3(d) Certificate of Amendment to Certificate of1997 Annual
Designations of Series A Junior Report on
Participating Preferred Stock of Form 10-K
Registrant.
3(e) By-Laws of Registrant, as amended through X
November 12, 1998.
4(a) Rights Agreement dated as of February 12, Form 8-A
1998 between Registrant and Harris Trust dated
and Savings Bank. February 12,
1998, Exhibit
1.
4(b) Letter to Shareholders dated February 12, Current
1998 relating to the adoption of a Report on
shareholders rights plan with attachments.Form 8-K
dated
February 12,
1998, Exhibit
1.
4(c) Indenture dated as of June 15, 1987 Quarterly
between Registrant and The First National Report on
Bank of Chicago. Form 10-Q for
the quarter
ended June
30, 1987.
51<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description of Document Reference to Submission
4(d) First Supplemental Indenture dated as of Current
September 1, 1989 between Registrant and Report on
The First National Bank of Chicago. Form 8-K
dated
September 28,
1989, Exhibit
4.3.
4(e) Second Supplemental Indenture dated as of Current
November 15, 1990 between Registrant and Report on
The First National Bank of Chicago. Form 8-K
dated
November 29,
1990.
4(f) Third Supplemental Indenture dated as of Current
August 20, 1996 between Registrant and Report on
The First National Bank of Chicago. Form 8-K
dated August
20, 1996.
4(g) U.S. $400,000,000 Credit Agreement Dated 1995 Annual
as of July 28, 1996 among Registrant, the Report on
banks Party Hereto and Bank of Montreal, Form 10-K
Chicago Branch as Agent and Royal Bank of
Canada as Co-Agent.
4(h) Second Amendment to Credit Agreement Dated1996 Annual
as of July 1, 1996 among Registrant, the Report on
banks Party Hereto and Bank of Montreal, Form 10-K
Chicago Branch as Agent and Royal Bank of
Canada as Co-Agent.
4(i) Third Amendment to Credit Agreement Dated 1997 Annual
as of June 10, 1997 among Registrant, the Report on
banks Party Hereto and Bank of Montreal, Form 10-K
Chicago Branch as Agent and Royal Bank of
Canada as Co-Agent.
4(j) Copies of instruments defining the rights
of holders of long-term debt not required
to be filed herewith or incorporated
herein by reference will be furnished to
the Commission upon request.
10(a) Annual Management Incentive Plan, as 1990 Annual
amended through December 21, 1990 (1). Report on
Form 10-K
10(b) Change of Control Agreements (1). X
10(c) Corporate Severance Agreements (1). 1989 Annual
Report on
Form 10-K.
52<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description of Document Reference to Submission
10(d) Revised definition of Change of Control 1995 Annual
adopted by the Board of Directors amendingReport on
the definition included in the Corporate Form 10-K
Severance Agreements listed in Exhibit
10(c).
10(e) 1989 Non-Employee Directors Stock Option Exhibit A to
Plan (1). Registrant's
Proxy
Statement
dated March
18, 1990.
10(f) 1986 Stock Option Plan for Executives and Exhibit A to
Key Employees (1). Registrant's
Proxy
Statement
dated March
14, 1986.
10(g) 1992 Stock Option Plan for Executives and Exhibit A to
Key Employees (1). Registrant's
Proxy
Statement
dated March
16, 1992.
10(h) 1991 Stock Incentive Award Plan for Key Exhibit A to
Executives (1). Registrant's
Proxy
Statement
dated March
15, 1991.
10(i) Directors Deferred Compensation Plan (1). Amendment No.
1 on Form 8
dated April
5, 1990 to
1989 Annual
Report on
Form 10-K.
10(j) 1996 Employee Stock Incentive Plan (1). Exhibit A to
Registrant's
Proxy
Statement
dated March
20, 1996.
53<PAGE>
Incorporated Filed with
Exhibit Herein by Electronic
Number Description of Document Reference to Submission
10(k) 1988 Capital Accumulation Plan for Key Amendment No.
Employees (1). (Superseded by Deferred 1 on Form 8
Compensation Plan, as amended and restateddated April
effective January 1, 1997) 5, 1990 to
1989 Annual
Report on
Form 10-K.
10(l) Maytag Deferred Compensation Plan, as 1995 Annual
amended and restated effective January 1, Report on
1996. Form 10-K
10(m) Directors Retirement Plan (1). Amendment No.
1 on Form 8
dated April
5, 1990 to
1989 Annual
Report on
Form 10-K.
10(n) 1998 Non-Employee Directors' Stock Option Exhibit A to
Plan (1). Registrant's
Proxy
Statement
dated April
2, 1998.
12 Ratio of Earnings to Fixed Charges. X
21 List of Subsidiaries of the Registrant. X
23 Consent of Ernst & Young LLP. X
27 (a) Financial Data Schedule - Twelve Months X
Ended December 31, 1998.
27 (b) Financial Data Schedule - Restated Twelve X
Months Ended December 31, 1997.
54<PAGE>
<TABLE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Maytag Corporation
Thousands of Dollars
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
DESCRIPTION Balance at Deductions-- Balance at End
Beginning Charged to Charged to Describe of Period
of Period Costs and Other
Expenses Accounts--
Describe
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful $ 36,386 $ 14,807 $ 29,743 (1) $ 22,305
accounts receivable 73 (2)
(928)(3)
$ 36,386 $ 14,807 $ 28,888 $ 22,305
Year ended December 31, 1997:
Allowance for doubtful $ 13,790 $ 26,212 (4) $ 3,903 (1)(4) $ 36,386
accounts receivable 1 (2)
(288)(5)
$ 13,790 $ 26,212 $ 3,616 $ 36,386
Year ended December 31, 1996:
Allowance for doubtful $ 12,540 $ 14,152 $ 14,169 (1) $ 13,790
accounts receivable 2 (2)
(1,269)(6)
$ 12,540 $ 14,152 $ 12,902 $ 13,790
Note 1 - Uncollectible accounts written off
Note 2 - Effect of foreign currency translation
Note 3 - Resulting from acquisition of Three Gorges in the fourth quarter of 1998.
Note 4 - These amounts have been reclassified to conform to 1998 presentation.
Note 5 - Resulting from acquisition of G.S. Blodgett Corporation in October 1997.
Note 6 - Resulting from acquistion of the Company's China joint venture in the fourth quarter of 1996.
</TABLE>
55<PAGE>
MAYTAG CORPORATION
Exhibit 3e
By-Laws of the Registrant
<PAGE>
MAYTAG CORPORATION
A Delaware Corporation
BYLAWS
Revised as of November 12, 1998<PAGE>
MAYTAG CORPORATION
BYLAWS
Offices
1. The registered office shall be in the City of Wilmington, County
of New Castle, State of Delaware, and the name of the registered agent in
charge thereof is the Corporation Trust Company. The corporation may also
have an office in the City of Newton, Jasper County, State of Iowa, and
also offices at such other places as the board of directors may from time
to time appoint or the business of the corporation may require.
Seal
2. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware."
Stockholders' Meetings
3. Meetings of the stockholders may be held at such place as shall be
determined by resolution of the board of directors.
4. An annual meeting of the stockholders shall be held on such date
and at such time and place as shall be fixed by resolution of the board of
directors. Any previously scheduled annual or special meeting of the
stockholders may be postponed by resolution of the board of directors upon
public notice given prior to the date previously scheduled for such meeting
of stockholders. At the annual meeting the stockholders shall elect
directors of the class for which the term expires on such date and shall
transact such other business as may properly be brought before the meeting.
Except as otherwise provided by statute or the Certificate of
Incorporation, the only business which properly shall be conducted at any
annual meeting of the stockholders shall (I) have been specified in the
written notice of the meeting (or any supplement thereto) given as provided
in Bylaw 7, (ii) be brought before the meeting by or at the direction of
the Board of Directors or the officer of the corporation presiding at the
meeting or (iii) have been specified in a written notice (a "Stockholder
Meeting Notice") given to the corporation, in accordance with all of the
following requirements, by or on behalf of any stockholder who is entitled
to vote at such meeting. Each Stockholder Meeting Notice must be delivered
<PAGE>
- 2 -
personally to, or be mailed to and received by, the secretary of the
corporation at the principal executive offices of the corporation, in
Newton, Iowa, not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced
by more than 30 days or delayed by more than 60 days from such anniversary
date, the Stockholder Meeting Notice to be timely must be so delivered not
earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual
meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made. For purposes of these Bylaws,
"public announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Securities Exchange Act of 1934, as amended. Each Stockholder Meeting
Notice shall set forth: (I) a description of each item of business
proposed to be brought before the meeting and the reasons for conducting
such business at the annual meeting; (ii) the name and record address of
the stockholder proposing to bring such item of business before the
meeting; (iii) the class and number of shares of stock held of record,
owned beneficially and represented by proxy by such stockholder as of the
record date for the meeting (if such date shall then have been made
publicly available) and as of the date of such Stockholder Meeting Notice
and; (iv) all other information which would be required to be included in a
proxy statement filed with the Securities and Exchange Commission if, with
respect to any such item of business, such stockholder were a participant
in a solicitation subject to Section 14 of the Securities Exchange Act of
1934 as amended. No business shall be brought before any annual meeting of
stockholders of the corporation otherwise than as provided in this Bylaw 4;
provided, however, that nothing contained in this Bylaw 4 shall be deemed
to preclude discussion by any stockholder of any business properly brought
before the annual meeting. The officer of the corporation presiding at the
annual meeting of stockholders shall, if the facts so warrant, determine
that business was not properly brought before the meeting in accordance
with the provisions of this Bylaw 4 and, if he should so determine, he
should so declare to the meeting and any such business so determined to be
not properly brought before the meeting shall not be transacted.
5. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person, or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided
by law, by the Certificate of Incorporation or by these Bylaws. The
officer of the corporation presiding at the meeting or a majority of the
shares so represented may adjourn the meeting from time to time, whether or
not there is such a quorum present. Notice of the time or place of an
adjourned meeting shall be given only as required by law. The stockholders
present at a duly called meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of sufficient stockholders to
constitute the remaining stockholders less than a quorum. At such
adjourned meeting at which the requisite amount of voting stock shall be<PAGE>
- 3 -
represented any business may be transacted which might have been transacted
at the meeting as originally notified. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
6. At each meeting of the stockholders every stockholder having the
right to vote shall be entitled to vote in person or may authorize another
person or persons to act for such stockholder as proxy by the methods
provided in Section 212 of the General Corporation Law of the State of
Delaware, as in effect from time to time. No such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. Each stockholder shall have one vote for each share of
stock having voting power, registered in his name on the books of the
corporation. The vote for directors, and upon the demand of any
stockholder, the vote upon any question before the meeting, shall be by
ballot. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Except as otherwise
provided by law, the Certificate of Incorporation or these Bylaws, in all
matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the
stockholders.
7. Written notice of the annual meeting shall be prepared and mailed
by the corporation to each stockholder entitled to vote thereat at such
address as appears on the stock book of the corporation at least ten and
not more than sixty days prior to the meeting.
8. A complete list of the stockholders entitled to vote at the
ensuing meeting, arranged in alphabetical order, with the address of each,
and the number of voting shares held by each, shall be prepared by the
secretary and filed in the office where the meeting is to be held, at least
ten days before every meeting of stockholders, and shall, during the usual
hours of business during such ten day period, and during the whole time of
said meeting of stockholders, be open to the examination of any stockholder
for any purpose germane to the meeting.
9. Special meetings of stockholders of the corporation may be called
only by the board of directors pursuant to a resolution approved by a
majority of the whole board of directors. Any previously scheduled annual
or special meeting of the stockholders may be postponed by resolution of
the board of directors upon public notice given prior to the date
previously scheduled for such meeting of stockholders. This Bylaw 9 may
not be amended or rescinded except by the affirmative vote of the holders
of at least two-thirds of the stock of the corporation issued and
outstanding and entitled to vote, at any regular or special meeting of the
stockholders if notice of the proposed alteration or amendment be contained
in the notice of meeting.
10. Business transacted at all special meetings shall be confined to<PAGE>
- 4 -
the objects stated in the notice of the special meeting. Written notice of
a special meeting of stockholders stating the time and place and object
thereof shall be prepared and mailed by the corporation, postage prepaid,
at least ten and not more than sixty days before such meeting, to each
stockholder entitled to vote thereat at such address as appears on the
books of the corporation.
11. The board of directors by resolution shall appoint one or more in-
spectors, which inspector or inspectors may include individuals who serve
the corporation in other capacities, including, without limitation, as
officers, employees, agents or representatives of the corporation, to act
at a meeting of stockholders and make a written report thereof. One or
more persons may be designated by the board of directors as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate has been appointed to act or is able to act at a meeting of
stockholders, the officer appointed to act or is able to act at a meeting
of stockholders, the officer of the corporation presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an
oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his or her ability. The inspectors shall have
the duties prescribed by law.
The officer of the corporation presiding at the meeting shall fix
and announce at the meeting the date and time of the opening and the
closing of the polls for each matter upon which the stockholders will vote
at the meeting.
Directors
12. The property and business of this corporation shall be managed by
its board of directors. Except as otherwise provided in these Bylaws or by
law, the directors of the corporation shall be elected at the annual
meeting of stockholders in each year. The number of directors which shall
constitute the whole board of directors shall be at least three and such
number may be fixed from time to time by a majority of the whole board, or
if the number is not so fixed, the number shall be eleven. The directors of
the corporation shall be divided into three classes, each class to consist,
as nearly as may be, of one-third of the number of directors then
constituting the whole board of directors.
At the 1977 Annual Meeting of Stockholders,
(a) one-third of the number of directors shall be elected to
serve until the 1978 Annual Meeting of Stockholders;
(b) one-third of the number of directors shall be elected to
serve until the 1979 Annual Meeting of Stockholders; and
(c) one-third of the number of directors shall be elected to<PAGE>
- 5 -
serve until the 1980 Annual Meeting of Stockholders, and until their
successors shall be duly elected and qualified.
At each annual election of directors after the 1977 Annual
Meeting of stockholders, the successors to the directors of each class
whose term shall expire in that year shall be elected to hold office for a
term of three years from the date of their election and until their
successors shall be duly elected and qualified. In the case of any increase
or decrease in the number of directors, the increase or decrease shall be
distributed among the several classes as nearly equally as possible, as
shall be determined by a majority of the whole board at the time of such
increase or decrease.
This Section 12 may not be amended or rescinded except by the
affirmative vote of the holders of at least two-thirds of the stock of the
corporation issued and outstanding and entitled to vote, at any regular or
special meeting of the stockholders if notice of the proposed alteration or
amendment be contained in the notice of the meeting.
13. The directors may hold their meetings and have one or more
offices, and keep the books of the corporation outside of Delaware, at the
office of the corporation in the city of Newton, Iowa, or at such other
places as they may from time to time determine.
14. In addition to the powers and authorities by these Bylaws
expressly conferred upon them, the board may exercise all such powers of
the corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these Bylaws directed
or required to be exercised or done by stockholders.
14A. Except as otherwise fixed pursuant to the Certificate of
Incorporation relating to the rights of the holders of any one or more
classes or series of Preferred Stock issued by the corporation, acting
separately by class or series, to elect, under specified circumstances,
directors at a meeting of stockholders, nominations for the election of
directors may be made by the board of directors or a committee appointed by
the board of directors or by any stockholder entitled to vote in the
election of directors generally. However, any stockholder entitled to vote
in the election of directors generally may nominate one or more persons for
election as directors at an annual meeting only if written notice of such
stockholder's intent to make such nomination or nominations has been
delivered personally to, or been mailed to and received by, the secretary
of the corporation at the principal executive offices of the corporation in
Newton, Iowa, not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced
by more than 30 days or delayed by more than 60 days from such anniversary
date, notice by the stockholder to be timely must be so delivered not
earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual
meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made. Each such notice shall set forth:
<PAGE>
- 6 -
(I) the name and record address of the stockholder who intends to make the
nomination; (ii) the name, age, principal occupation or employment,
business address and residence address of the person or persons to be
nominated; (iii) the class and number of shares of stock held of record,
owned beneficially and represented by Proxy by such stockholder and by the
person or persons to be nominated as of the date of such notice; (iv) a
representation that the stockholder intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice;
(v) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to
be made by such stockholder; (vi) such other information regarding each
nominee proposed by such stockholder as would be required to be included in
a proxy statement filed pursuant to the Securities Exchange Act of 1934, as
amended, and the proxy rules of the Securities and Exchange Commission; and
(vii) the consent of each nominee to serve as a director of the corporation
if so elected. The corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the corporation to
determine the eligibility of such proposed nominee to serve as a director
of the corporation. Notwithstanding anything in the second sentence of
this Bylaw 14A to the contrary, in the event that the number of directors
to be elected to the board of directors of the corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased board of directors made by the
corporation at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this
Bylaw 14A shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the secretary at the principal executive offices of the
corporation, in Newton, Iowa, not later than the close of business on the
10th day following the day on which such public announcement is first made
by the corporation. The officer of the corporation presiding at the annual
meeting of stockholders shall, if the facts so warrant, determine that a
nomination was not made in accordance with the provisions of this Bylaw
14A, and if he should so determine, he should so declare to the meeting and
the defective nomination shall be disregarded.
Nominations of persons for election to the board of directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (a) by or at the
direction of the board of directors or (b) provided that the board of
directors has determined that directors shall be elected at such meeting,
by any stockholder of the corporation who is a stockholder of record at the
time of giving of notice provided for in this Bylaw 14A, who shall be
entitled to vote at the meeting and who complies with the notice procedures
set forth in this Bylaw 14A. In the event the corporation calls a special
meeting of stockholders for the purpose of electing one or more directors
to the board, any such stockholder may nominate a person or persons (as the
case may be), for election to such position(s) as specified in the
corporation's notice of meeting, if the stockholder's notice required by
the first paragraph of this Bylaw 14A shall be delivered to the secretary
at the principal executive offices of the corporation not earlier than the<PAGE>
- 7 -
90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the
10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the board
of directors to be elected at such meeting.
No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in
these Bylaws.
Notwithstanding the provisions of Bylaw 4 and this Bylaw 14A, a
stockholder shall also comply with all applicable requirements of the
Securities and Exchange Act of 1934, as amended, and the rules and
regulations thereunder with respect to the matters set forth in Bylaw 4 and
this Bylaw 14A. Nothing in Bylaw 4 and this Bylaw 14A shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Securities
and Exchange Act of 1934, as amended.
Executive Committee
15. There may be an executive committee of two or more directors
designated by resolution passed by a majority of the whole board. Said
committee may meet at stated times, or on notice to all by any of their own
number. During the intervals between meetings of the board such committee
shall advise with and aid the officers of the corporation in all matters
concerning its interests and the management of its business, and generally
perform such duties and exercise such powers as may be directed or
delegated by the board of directors from time to time. The board may
delegate to such committee authority to exercise all the powers of the
board excepting power to amend the Bylaws, while the board is not in
session. Vacancies in the membership of the committee shall be filled by
the board of directors at a regular meeting or at a special meeting called
for that purpose.
16. The executive committee shall keep regular minutes of its
proceedings and report the same to the board when required.
Compensation of Directors
17. Directors who as officers or employees of the corporation receive
compensation from it shall not receive any stated compensation for their
services as directors; but by resolution of the board reasonable
compensation for attendance at board meetings may be allowed and paid.
Directors who do not receive compensation from the corporation
for employment with it in the capacity of an officer or employee shall be
allowed and paid such stated compensation as may be fixed by the board of<PAGE>
- 8 -
directors; and such directors shall be reimbursed for expenses incurred in
connection with the performance of their duties or services as director,
the amount thereof to be allowed and paid by resolution of the board.
Nothing herein contained shall be construed as precluding a
director from serving the company in any other capacity and receiving
compensation therefor.
18. Members of special or standing committees may be allowed and paid
compensation for their services as such, and expenses incident thereto, in
such amounts as from time to time are fixed and allowed by the board of
directors.
Meetings of the Board
19. The newly elected board may meet without notice for the purpose of
organization or otherwise immediately following the annual meeting of the
stockholders or at such place and time as shall be fixed by resolution of
the board.
20. Regular meetings of the board may be held without notice at such
time and place as shall from time to time be determined by resolution of
the board.
21. Special meetings of the board may be called by the chairman of the
board or the president on two days' written notice mailed to each director,
or on not less than 24 hours' notice delivered to each director personally,
telephonically or by telegram or telecopy at such number as has been
provided by the director; special meetings shall be called by the chairman
of the board, the president or secretary in like manner and on like notice
on the written request of a majority of the directors then in office. A
special meeting may be held without notice if all the directors are present
or, if those not present waive notice of the meeting in writing, either
before or after such meeting.
22. At all meetings of the board, four directors, but not less than
one-third of the total number of directors, shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the
act of a majority of the directors present at any meeting at which there is
a quorum, shall be the act of the board of directors, except as may be
otherwise provided by statute or by the Certificate of Incorporation or by
these Bylaws.
Officers
23. The officers of this corporation shall be chosen by the directors
and shall be a president, one or more vice presidents, a secretary,
controller, and such assistant secretaries as the board of directors may
designate. The board may also elect a chairman of the board and in that<PAGE>
- 9 -
event, shall designate whether he or the president shall be the chief
executive officer of the corporation.
24. The board of directors, at its first meeting after each annual
meeting of stockholders, shall elect the corporate officers.
25. The board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from
time to time by the board.
26. The salaries of the officers of the corporation shall be fixed
from time to time by the board of directors; provided that in the case of
officer members of the board of directors their salaries may be fixed from
time to time by either of the following additional methods: (I) by a salary
committee of not less than three members appointed, by a resolution passed
by a majority of the whole board of directors, from among the members of
the board of directors who are not officers of the corporation, or (ii) by
a salary committee composed of all members of the board of directors who
are not officers of the corporation, such committee to act by a majority of
its members. None of the officers of the corporation shall be prevented
from receiving a salary by reason of the fact that he is also a member of
the board of directors; but an officer who shall also be a member of the
board of directors shall not have any vote in a determination by the board
of directors of the amount of salary that shall be paid to him.
27. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the whole board of directors.
Chairman of the Board of Directors
28. Whenever a chairman of the board of directors has been elected by
the board, he shall preside at all meetings of the board of directors and
of the stockholders. If no chairman of the board is elected, the president
shall act as the chairman of the board and shall assume the powers and
duties of the chairman.
President
29. (a) The president shall be the chief executive officer of the
corporation unless a chairman of the board has been elected and designated
as such officer. Subject to the authority of the chairman of the board in
such event, the president shall have general and active management of the
business of the corporation and shall see that all orders and resolutions
of the board are carried into effect. In the absence or disability of the
chairman of the board, where that office has been filled by election of the
<PAGE>
- 10 -
board, the powers and duties of the chairman shall be assumed by the
president.
(b) He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation.
(c) He shall be ex-officio a member of all standing committees,
and shall have the general powers and duties of supervision and management
usually vested in the office of president of the corporation.
Vice President
30. The board of directors may elect one or more vice presidents and
may designate one or more of the vice presidents to be executive vice
presidents. Subject to the succession provided for in Bylaw 29(a), in the
absence or disability of the CEO, the executive vice presidents, or the
vice presidents in the event none have been designated "Executive", in the
order designated, (or in the absence of any designation, then in the order
of their election) shall perform the duties and exercise the powers of the
CEO. The vice president(s) shall perform such other duties as the board of
directors may prescribe.
Secretary
31. The secretary shall attend all sessions of the board and all
meetings of the stockholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall be custodian of
the corporate records and of the seal of the corporation and see that the
seal of the corporation is affixed to all documents, the execution of which
on behalf of the corporation under its seal is duly authorized. He shall
give, or cause to be given, notice of all meetings of the stockholders and
of the board of directors, and shall perform such other duties as may be
prescribed by the board of directors or president, under whose supervision
he shall be.
Treasurer
32. (a) The treasurer shall, under the general direction of the Chief
Financial Officer, be responsible for the planning and directing of
corporate finance activities. He shall have the custody of corporate funds
and securities and shall deposit all moneys, and other valuable effects in
the name and to the credit of the Corporation, in such depositories as may
be designated by the Board of Directors.
(b) He shall disburse the funds of the Corporation as may be<PAGE>
- 11 -
ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board, the President and the directors,
at the regular meetings of the Board, or whenever they may require it, an
account of all his transactions as Treasurer.
(c) He shall give the Corporation a bond if required by the Board
of Directors in a sum, and with one or more sureties satisfactory to the
Board, for the faithful performance of the duties of his office, and for
the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in his possession or under his control
belonging to the Corporation.
Chief Financial Officer
33. The Chief Financial Officer of the corporation shall have the
general responsibility for the financial operations of the corporation and
for all receipts and disbursements of the funds of the corporation.
Controller
34. The controller shall be the chief accounting officer of the
corporation.
Assistant Secretary
35. The assistant secretaries in the order of their seniority shall,
in the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary, and shall perform such other duties
as the board of directors shall prescribe.
Assistant Treasurer
36. Repealed.
Vacancies and Newly Created Directorships
37. If the office of any officer or agent becomes vacant by reason of
death, resignation, retirement, disqualification, removal from office or
otherwise, such vacancy may be filled by the board of directors.
Vacancies in the board of directors and newly created directorships
resulting from any increase in the authorized number of directors may be<PAGE>
- 12 -
filled by a majority of the directors then in office, though less than a
quorum, and the directors so chosen shall hold office until the expiration
of the term of the class to which they have been chosen and until their
successors are duly elected and qualified. This second paragraph of Section
37 may not be amended or rescinded except by the affirmative vote of the
holders of at least two-thirds of the stock of the corporation issued and
outstanding and entitled to vote, at any regular or special meeting of the
stockholders if notice of the proposed alteration or amendment be contained
in the notice of the meeting.
Duties of Officers May be Delegated
38. In case of the absence of any officer of the corporation, or for
any other reason that the board may deem sufficient, the board may
delegate, for the time being, the powers or duties, or any of them, of such
officer to any other officer, or to any director, provided a majority of
the entire board concur therein.
Certificates of Stock
39. The certificates of stock of the corporation shall be numbered and
shall be entered in the books of the corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by
the president or a vice president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary.
Transfers of Stock
40. Transfers of stock shall be made on the books of the corporation
only by the person named in the certificate or by attorney, lawfully
constituted in writing, and upon surrender of the certificate therefor.
41. The board of directors shall have power to appoint one or more
transfer agents and/or one or more registrars of transfers and may provide
that the issuance of certificates of stock of this corporation shall not be
valid unless signed by such transfer agent or transfer agents and/or
registrar of transfers or registrars of transfers, and if such certificate
is countersigned (1) by a transfer agent other than the corporation or its
employee, or (2) by a registrar other than the corporation or its employee,
any other signature on the certificate may be a facsimile.
Record Dates
42. In order that the corporation may determine the stockholders<PAGE>
- 13 -
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the board of directors may fix a record
date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any such other action. If no
record date is fixed, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close
of business of the day next preceding the day on which notice is given, and
the record date for any other purpose shall be at the close of business on
the day on which the board of directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
Registered Stockholders
43. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to or interest
in such share on the part of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the laws of
Delaware.
Lost Certificate
44. Any person claiming a certificate of stock to be lost, stolen or
destroyed, shall make an affidavit or affirmative of the fact and advertise
the same in such manner as the board of directors may require, and shall if
the directors so require give the corporation a bond of indemnity,
sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of a new replacement certificate, whereupon a
new certificate may be issued of the same tenor and for the same number of
shares as the one alleged to be lost, stolen or destroyed.
Inspection of Books
45. The directors shall determine from time to time whether and, if
allowed, when and under what conditions and regulations the accounts and
books of the corporation (except such as may by statute be specifically
open to inspection) or any of them shall be open to the inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
<PAGE>
- 14 -
restricted and limited accordingly.
Checks
46. All checks or demands for money and notes of the corporation,
shall be signed by such officer or officers, employee or employees as the
board of directors may from time to time designate.
Fiscal Year
47. The fiscal year shall begin the first day of January in each year.
Directors' Annual Statement
48. The board of directors shall present at each annual meeting, and
when called for by vote of the stockholders at any special meeting of the
stockholders, a full and clear statement of the business and condition of
the corporation.
Notices
49. Except as otherwise provided in these Bylaws, whenever under the
provisions of these Bylaws notice is required to be given to any director,
officer or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by telecopy as provided in Bylaw
21, by mail, by depositing the same in the post office or letter box, in a
postpaid sealed wrapper, addressed to such stockholder, officer or director
at such address as appears on the books of the corporation, or, in default
of other address, to such director, officer or stockholder at the General
Post Office in the City of Wilmington, Delaware, and such notice shall be
deemed to be given at the time when the same shall be thus mailed.
Any stockholder, director, or officer may waive any notice
required to be given under these Bylaws, either before or after the event
for which such notice was required.
Incentive Payments
50. Repealed.
51. Unless otherwise provided by resolution adopted by the board of<PAGE>
- 15 -
directors, the president or any vice president or the secretary may from
time to time appoint an attorney or attorneys, or an agent or agents, to
exercise in the name and on behalf of the company the powers and rights
which it may have as the holder of stock or other securities in any other
corporation or membership in any organization, to vote or consent in
respect of such stock or other securities or membership, and the president,
or any vice president or the secretary may execute or cause to be executed
in the name and on behalf of the company and under its corporate seal, or
otherwise all such written proxies or other instruments as he may deem
necessary or proper in order that the company may exercise its powers and
rights.
Amendments
52. Except as otherwise provided in these Bylaws, these Bylaws may be
altered or amended by the affirmative vote of a majority of the stock
issued and outstanding and entitled to vote thereat, at any regular or
special meeting of the stockholders, if notice of the proposed alteration
or amendment be contained in the notice of the meeting, or (except as
otherwise provided in these Bylaws) by the affirmative vote of a majority
of the board of directors at a regular or special meeting of the board.
* * * * *
I, E. James Bennett, Secretary of MAYTAG CORPORATION, a corporation
organized and existing under the laws of the State of Delaware, do hereby
certify that as such Secretary, I have custody and possession of the
records and corporate seal of said corporation, and that the foregoing is a
full, true and correct copy of the Bylaws of said corporation in my custody
and possession; and that the seal hereto affixed is the common or corporate
seal of said corporation so in my custody and possession.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary and
affixed the corporate seal of said corporation this 12th day of November,
A.D., 1998.
/s/ E. James Bennett
Secretary<PAGE>
MAYTAG CORPORATION
Exhibit 10(b)
Executive Severance Agreements.<PAGE>
The following executives are covered under this severance agreement:
Len Hadley
Lloyd Ward
Jerry Pribanic
Ed Graham
John Dupuy
Jon Nicholas
Dave Urbani
Bill Beer
Larry Blanford
Ron Caldwell
Kent Baker
Keith Minton
Bob Downing
Carl Moe
Glenn Kelsey
<PAGE>
Change of Control Agreement
THIS AGREEMENT is made this _____________ day of _____________, 1998 (the
"Effective Date"), by and between Maytag Corporation, a Delaware corporation
(the "Company"), and ---------- (the "Executive"), and shall continue in effect
for three full calendar years (through the year 2001 (the Initial Term ).
The Initial Term of this agreement automatically shall be extended for one
additional year on the first anniversary of the Effective Date, and then again
on each anniversary thereafter (each such one-year period following the Initial
Term a "Successive Period").
In the event that a "Change of Control" of the Company occurs (as such term
is hereinafter defined) during the Initial Term or any Successive Period, upon
the effective date of such Change of Control, the term of this agreement shall
automatically and irrevocably be renewed for a period of thirty-six (36) full
calendar months from the effective date of such Change of Control. This
agreement shall thereafter automatically terminate following the thirty-six (36)
month Change-of-Control renewal period. Further, this agreement shall be
assigned to, and shall be assumed by the purchaser in such Change of Control, as
further provided herein in paragraph D5 of the section titled "Agreements."
RECITALS
A. The Board of Directors of the Company has approved the Company
entering into severance agreements with such executives of the Company and its
subsidiaries as is determined by the Chairman and Chief Executive Officer.
B. Should the Company receive or learn of any proposal by a third person
about a possible business combination with the Company or the acquisition of its
equity securities, the Board considers it imperative that the Company be able to
rely upon the Executive to continue in his or her position. This to the end that
the Company be able to receive and rely upon the Executive's advice concerning
the best interests of the Company and its stockholders, without concern that
person might be distracted by the personal uncertainties and risks created by
such a proposal.
C. Should the Company receive any such proposals, in addition to the
Executive's regular duties, he or she may be called upon to assist in the
assessment of such proposals, advise management and the Board as to whether such
proposals would be in the best interests of the Company and its stockholders,
and to take such other actions as the Board might determine to be appropriate.
<PAGE>
AGREEMENT
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of that person's advice and
counsel notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration, the Company and
the Executive agree that the Executive Severance Agreement described above be
amended and restated in its entirety as follows:
A. Should a third person, in order to effect a change of control (as
defined), begin a tender or exchange offer, circulate a proxy to stockholders or
take other steps, the Executive agrees that he or she will not voluntarily leave
the employ of the Company, and will render the services contemplated in the
recitals to this agreement, until the third person has abandoned or terminated
his efforts to effect a change of control or until a change of control has
occurred.
B. Should the Executive's employment with the Company or its subsidiaries
terminate for any reason (either voluntary or involuntary), other than because
of death, disability, Cause, or Normal Retirement within three (3) years after a
change of control of the Company, or in the event a successor company refuses to
accept its obligations under this agreement as required by paragraph D5 herein,
the following will be provided:
1. Lump Sum Cash Payment. On or before the Executive's last day of
employment with the Company or its subsidiaries, or as soon thereafter as
possible, the Company will pay to the Executive as compensation for services
rendered, a lump sum cash amount (subject to the usual withholding taxes) equal
to (A) three times the sum of (1) the Executive's annual salary at the rate in
effect immediately prior to the change of control and (2) the then-current
maximum cash bonus opportunity established under the annual incentive plan for
the bonus plan year in which termination occurs (but in no event shall such
maximum cash bonus be less than that in effect for the period immediately prior
to the change of control) plus (B) an amount equal to the compensation (at the
Executive's rate of pay in effect immediately prior to the change of control)
payable for any period for which the Executive could have, immediately prior to
the date of his termination of employment, been on vacation and received such
compensation, for unused and accrued vacation benefits determined under the
Company's vacation pay plan or program covering the Executive immediately prior
to the change of control.
2. Salaried and Supplemental Executive Retirement Plans. The Executive
shall be paid a monthly retirement benefit, in addition to any benefits received
under the Salaried Retirement Plans maintained by the Company or its
subsidiaries, including The Maytag Corporation Salaried Retirement Plan and any
Supplemental Executive Retirement Plan, such benefit to commence on the first to
occur of (a) the commencement of payment of benefits under the Maytag
Corporation Salaried Retirement Plan or (b) attainment of age 65, but not prior
to three (3) years following the date of termination of employment or age 65,
whichever first occurs, such benefit to be an amount equal to the excess of (i)
the aggregate benefits under such Salaried Retirement Plans to which the
Executive would be entitled if he or she remained employed by the Company or its
subsidiaries, for an additional period of three (3) years, at the rate of annual
compensation specified herein; over (ii) the benefits to which the Executive is
actually entitled under such Salaried Retirement Plans.<PAGE>
The source of payment of these benefits shall be the general assets of the
Company unless the payment of such amounts is otherwise permissible from the
corresponding qualified plan trust without violating any governmental
regulations or statutes.
3. Life, Dental, Vision, Health and Long-Term Disability Coverage. The
Executive's participation in, and entitlement to, benefits under: (i) the life
insurance plan of the Company; (ii) all the health insurance plan or plans of
the Company or its subsidiaries, including but not limited to those providing
major medical and hospitalization benefits, dental benefits and vision benefits;
and (iii) the Company's long-term disability plan or plans; as all such plans
existed immediately prior to the change of control shall continue as though he
or she remained employed by the Corporation or its subsidiaries for an
additional period of three (3) years. The applicable COBRA health insurance
benefit continuation period shall begin at the end of this three (3) year
period. To the extent such participation or entitlement is not possible for any
reason whatsoever, equivalent benefits shall be provided.
The providing of these benefits by the Company shall be discontinued prior
to the end of the three (3) year continuation period in the event that the
Executive becomes covered under the insurance programs of a subsequent employer
and, with respect to all health insurance plans, provided that such subsequent
employer's health insurance plans do not contain any exclusion or limitation
with respect to any preexisting condition of the Executive or the Executive's
eligible dependents. For purposes of enforcing this offset provision, the
Executive shall have a duty to inform the Company as to the terms and conditions
of any subsequent employment and the corresponding benefits earned from such
employment. The Executive shall provide, or cause to provide, to the Company in
writing correct, complete, and timely information concerning the same.
4. Participation in Employee Benefit Plans. Unless otherwise provided,
the Executive's participation in any other savings, capital accumulation,
retirement, incentive compensation, profit sharing, stock option, and/or stock
appreciation rights plans of the Company or any of its subsidiaries shall
continue only through the last day of his or her employment. Any terminating
distributions and/or vested rights under such plans shall be governed by the
terms of those respective plans. Furthermore, the Executive's participation in
any insurance plans of the Company and rights to any other fringe benefits
shall, except as otherwise specifically provided in such plans or Company
policy, terminate as of the close of the Executive's last day of employment,
except to the extent specifically provided to the contrary in this agreement.
5. Incentive Plans. In addition to the payments required by paragraph 1
of this Section, the Company shall pay to the Executive as compensation for
services rendered cash in an amount equal to the then-current maximum cash bonus
opportunity established under the annual incentive plan for the bonus plan year
in which termination occurs, adjusted on a pro rata basis based on the number of
days the Executive was actually employed during such bonus plan year (but in no
event shall such maximum cash bonus be less than that in effect for the period
immediately prior to the change of control). In the case of long-term stock
incentive awards represented by restricted shares of stock of the Company, made
to Executive under the Maytag Corporation Employee Stock Incentive Plan (any
prior plan, or successor plan) in lieu of stock under such stock incentive
awards the Executive shall receive a cash payment equal to the aggregate value
of the maximum number of shares for which the Executive holds outstanding
awards, with share value determined at the closing price as of the date of the
change of control. Any payment due pursuant to this paragraph 5 shall be paid
<PAGE>
at the same time as the amounts payable pursuant to paragraph 1 of this Section.
6. Excise Tax-Additional Payment. (a) Notwithstanding anything in this
agreement or any written or unwritten policy of the Company or its subsidiaries
to the contrary, (i) if it shall be determined that any payment or distribution
by the Company or its subsidiaries to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
this agreement, any other agreement between the Company or its subsidiaries and
the Executive or otherwise (a "Payment"), would be subject to the excise tax
imposed by section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (ii) if the Executive shall
otherwise become obligated to pay the Excise Tax in respect of a Payment, then
the Company shall pay to the Executive an additional payment in an amount to
cover the full cost of any Excise Tax and the Executive's state and federal
income and employment taxes on this additional payment (cumulatively, the
"Gross-Up Payment").
(b) All determinations and computations required to be made under this
section B6, including whether a Gross-Up Payment is required under clause (ii)
of paragraph B6(a) above, and the amount of any Gross-Up Payment, shall be made
by the Company's regularly engaged independent certified public accountants (the
"Accounting Firm"). The Company shall cause the Accounting Firm to provide
detailed supporting calculations both to the Company and the Executive within 15
business days after such determination or computation is requested by the
Executive. Any initial Gross-Up Payment determined pursuant to this paragraph B6
shall be paid by the Company or the subsidiary to the Executive within 5 days of
the receipt of the Accounting Firm's determination. A determination that no
Excise Tax is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive that
the Executive has substantial authority not to report any Excise Tax on his
federal income tax return. Any determination by the Accounting Firm shall be
binding upon the Company, its subsidiaries and the Executive, except to the
extent the Executive becomes obligated to pay an Excise Tax in respect of a
Payment. In the event that the Company or the subsidiary exhausts or waives its
remedies pursuant to subparagraph B6(c) and the Executive thereafter shall
become obligated to make a payment of any Excise Tax, and if the amount thereof
shall exceed the amount, if any, of any Excise Tax computed by the Accounting
Firm pursuant to this subparagraph (b) in respect to which an initial Gross-Up
Payment was made to the Executive, the Accounting Firm shall within 15 days
after Notice thereof determine the amount of such excess Excise Tax and the
amount of the additional Gross-Up Payment to the Executive. All expenses and
fees of the Accounting Firm incurred by reason of this paragraph B6 shall be
paid by the Company.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty-day period following the date
on which it gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:<PAGE>
(i) give the Company any information reasonably requested relating to
such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim,
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this subparagraph B6(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company or the
subsidiary shall determine; provided, however, that if the Company or the
subsidiary directs the Executive to pay such claim and sue for a refund, the
Company or the subsidiary shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided, that any extension of the statue of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, control of the contest by the Company or the subsidiary shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company or the subsidiary pursuant to subparagraph B6(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to compliance with the requirements of paragraph B6 by the Company or
the subsidiary) promptly pay to the Company or the subsidiary the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to subparagraph B6(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
<PAGE>
of thirty days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall off-set,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
C. Definitions.
1. "Cause." For purposes of this agreement, Cause shall be determined
by the Board of Directors, in the exercise of good faith and reasonable
judgment, and shall mean the occurrence of any one or more of the following:
(a) A demonstrably willful and deliberate act or failure to act by the
Executive (other than as a result of incapacity due to physical or mental
illness) which is committed in bad faith, without reasonable belief that such
action or inaction is in the best interests of the Company, which causes actual
material financial injury to the Company and which act or inaction is not
remedied within fifteen (15) business days of written notice from the Company;
or
(b) The Executive's conviction for committing an act of fraud,
embezzlement, theft, or any other act constituting a felony involving moral
turpitude or causing material harm, financial or otherwise, to the Company.
2. Change of Control. For purposes of this agreement, "change of control"
shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
Outstanding Company Common Stock ) or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition by
the Company, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (c)
below; or
(b) Individuals who, as of the date hereof, constitute the Board (the
Incumbent Board ) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of a least a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
<PAGE>
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
3. Normal Retirement. For purposes of this agreement, "Normal Retirement"
shall have the same meaning as provided in the Maytag Corporation Salaried
Retirement Plan; provided, however, that "Normal Retirement" shall not include
terminations of the Executive by the Company without Cause.
4. Subsidiary. For purposes of this agreement, a "Subsidiary" shall mean
any domestic or foreign corporation at least 20% of whose shares normally
entitled to vote in electing directors is owned directly or indirectly by the
Company or by other subsidiaries.
D. General Provisions.
1. No Guaranty of Employment. Nothing in this agreement shall be deemed
to entitle the Executive to continued employment with the Company or its
subsidiaries, and the rights of the Company to terminate the employment of the
Executive shall continue as fully as if this agreement were not in effect,
provided that any such termination of employment within three (3) years
following a change of control shall entitle the Executive to the benefits herein
provided.
2. Confidentiality. The Executive shall retain in confidence any
confidential information known to him concerning the Company and its business so
long as such information is not publicly disclosed.
3. Payment Obligation Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against him, her or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
<PAGE>
Each and every payment made hereunder by the Company shall be final and the
Company shall not seek to recover all or any part of such payment from the
Executive or from whoever may be entitled thereto, for any reason whatsoever.
In the event that the cash payment due the Executive under Paragraph B1 or
B5 herein is not paid to the Executive within thirty (30) calendar days of the
Executive's employment termination, such amount due shall accrue interest
(compounded monthly) beginning on the date of employment termination at a rate
equal to the prevailing Prime Rate as determined by Harris Bank of Chicago, or
the Company's then-current primary banking institution. Further, to the extent
this additional amount would be subject to the Excise Tax, the Company shall pay
to the Executive a Gross-Up Payment, as such terms are described in Paragraph B6
herein.
4. Dispute Resolution.
(a) The Company shall pay all legal fees, costs of litigation, prejudgment
interest, and other expenses which are incurred in good faith by the Executive
as a result of the Company's refusal to provide the benefits to which the
Executive becomes entitled under this agreement, or as a result of the Company's
(or any third party's) contesting the validity, enforceability, or
interpretation of the agreement, or as a result of any conflict between the
parties pertaining to this agreement.
(b) The Executive shall have the right and option to elect (in lieu of
litigation) to have any dispute or controversy arising under or in connection
with this agreement settled by arbitration, conducted before a panel of three
(3) arbitrators sitting in a location selected by the Executive within fifty
(50) miles from the location of his or her job with the Company, in accordance
with the rules of the American Arbitration Association then in effect. The
Executive's election to arbitrate, as herein provided, and the decision of the
arbitrators in that proceeding, shall be binding on the Company and the
Executive.
Judgment may be entered on the award of the arbitrator in any court having
jurisdiction. All expenses of such arbitration, including the fees and expenses
of the counsel for the Executive, shall be borne by the Company.
5. Successors. This agreement shall be binding upon and inure to the
benefit of the Executive and his or her estate, and the Company and any
successor of the Company, but neither this agreement nor any rights arising
hereunder may be assigned or pledged by the Executive.
6. Severability. Any provision in this agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7. Entire Agreement. With respect to the subject matter hereof, this
agreement supersedes any prior agreements or understandings, oral or written,
between the parties hereto and contains the entire understanding of the Company
and the Executive.<PAGE>
8. Controlling Law. This agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this agreement on the date
set out above.
MAYTAG CORPORATION
By_____________________
Chairman & CEO
Leonard A. Hadley<PAGE>
The following executives are covered under this Change of Control agreement:
Steven H. Wood
Terry A. Carlson
Edward C. Wojciechowski
Arthur B. Learmonth
Jerome L. Davis
Thomas A. Briatico
Fredrick P. Foltz
Victor Lawrence
<PAGE>
Change of Control Agreement
THIS AGREEMENT is made this ___________ day of ____________, 1998 (the
"Effective Date"), by and between Maytag Corporation, a Delaware
corporation (the "Company"), and ______ (the "Executive"), and shall
continue in effect for two full calendar years (through the year 2000) (the
"Initial Term").
The Initial Term of this agreement automatically shall be extended for
one additional year on the first anniversary of the Effective Date, and
then again on each anniversary thereafter (each such one-year period
following the Initial Term a "Successive Period").
In the event that a "Change of Control" of the Company occurs (as such
term is hereinafter defined) during the Initial Term or any Successive
Period, upon the effective date of such Change of Control, the term of this
agreement shall automatically and irrevocably be renewed for a period of
twenty-four (24) full calendar months from the effective date of such
Change of Control. This agreement shall thereafter automatically terminate
following the twenty-four (24) month Change-of-Control renewal period.
Further, this agreement shall be assigned to, and shall be assumed by the
purchaser in such Change of Control, as further provided herein in
paragraph D5 of the section titled "Agreements."
RECITALS
A. The Board of Directors of the Company has approved the Company
entering into severance agreements with such executives of the Company and
its subsidiaries as is determined by the Chairman and Chief Executive
Officer.
B. Should the Company receive or learn of any proposal by a third
person about a possible business combination with the Company or the
acquisition of its equity securities, the Board considers it imperative
that the Company be able to rely upon the Executive to continue in his or
her position. This to the end that the Company be able to receive and rely
upon the Executive's advice concerning the best interests of the Company
and its stockholders, without concern that person might be distracted by
the personal uncertainties and risks created by such a proposal.
C. Should the Company receive any such proposals, in addition to the
Executive's regular duties, he or she may be called upon to assist in the
assessment of such proposals, advise management and the Board as to whether
such proposals would be in the best interests of the Company and its
stockholders, and to take such other actions as the Board might determine
to be appropriate.<PAGE>
AGREEMENT
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of that person's advice
and counsel notwithstanding the possibility, threat or occurrence of a bid
to take over control of the Company, and to induce the Executive to remain
in the employ of the Company, and for other good and valuable
consideration, the Company and the Executive agree that the Executive
Severance Agreement described above be amended and restated in its entirety
as follows:
A. Should a third person, in order to effect a change of control (as
defined), begin a tender or exchange offer, circulate a proxy to
stockholders or take other steps, the Executive agrees that he or she will
not voluntarily leave the employ of the Company, and will render the
services contemplated in the recitals to this agreement, until the third
person has abandoned or terminated his efforts to effect a change of
control or until a change of control has occurred.
B. Should the Executive's employment with the Company or its
subsidiaries terminate for any reason (either voluntary or involuntary),
other than because of death, disability, Cause, or Normal Retirement within
two (2) years after a change of control of the Company, or in the event a
successor company refuses to accept its obligations under this agreement as
required by paragraph D5 herein, the following will be provided:
1. Lump Sum Cash Payment. On or before the Executive's last day of
employment with the Company or its subsidiaries, or as soon thereafter as
possible, the Company will pay to the Executive as compensation for
services rendered, a lump sum cash amount (subject to the usual withholding
taxes) equal to (A) two times the sum of (1) the Executive's annual salary
at the rate in effect immediately prior to the change of control and (2)
the then-current maximum cash bonus opportunity established under the
annual incentive plan for the bonus plan year in which termination occurs
(but in no event shall such maximum cash bonus be less than that in effect
for the period immediately prior to the change of control) plus (B) an
amount equal to the compensation (at the Executive's rate of pay in effect
immediately prior to the change of control) payable for any period for
which the Executive could have, immediately prior to the date of his
termination of employment, been on vacation and received such compensation,
for unused and accrued vacation benefits determined under the Company's
vacation pay plan or program covering the Executive immediately prior to
the change of control.
2. Salaried and Supplemental Executive Retirement Plans. The
Executive shall be paid a monthly retirement benefit, in addition to any
benefits received under the Salaried Retirement Plans maintained by the
Company or its subsidiaries, including The Maytag Corporation Salaried
Retirement Plan and any Supplemental Executive Retirement Plan, such
benefit to commence on the first to occur of (a) the commencement of
payment of benefits under the Maytag Corporation Salaried Retirement Plan
or (b) attainment of age 65, but not prior to two (2) years following the
date of termination of employment or age 65, whichever first occurs, such
benefit to be an amount equal to the excess of (i) the aggregate benefits
under such Salaried Retirement Plans to which the Executive would be<PAGE>
entitled if he or she remained employed by the Company or its subsidiaries,
for an additional period of two (2) years, at the rate of annual
compensation specified herein; over (ii) the benefits to which the
Executive is actually entitled under such Salaried Retirement Plans.
The source of payment of these benefits shall be the general assets of
the Company unless the payment of such amounts is otherwise permissible
from the corresponding qualified plan trust without violating any
governmental regulations or statutes.
3. Life, Dental, Vision, Health and Long-Term Disability Coverage.
The Executive's participation in, and entitlement to, benefits under: (i)
the life insurance plan of the Company; (ii) all the health insurance plan
or plans of the Company or its subsidiaries, including but not limited to
those providing major medical and hospitalization benefits, dental benefits
and vision benefits; and (iii) the Company's long-term disability plan or
plans; as all such plans existed immediately prior to the change of control
shall continue as though he or she remained employed by the Corporation or
its subsidiaries for an additional period of two (2) years. The applicable
COBRA health insurance benefit continuation period shall begin at the end
of this two (2) year period. To the extent such participation or
entitlement is not possible for any reason whatsoever, equivalent benefits
shall be provided.
The providing of these benefits by the Company shall be discontinued
prior to the end of the two (2) year continuation period in the event that
the Executive becomes covered under the insurance programs of a subsequent
employer and, with respect to all health insurance plans, provided that
such subsequent employer's health insurance plans do not contain any
exclusion or limitation with respect to any preexisting condition of the
Executive or the Executive's eligible dependents. For purposes of enforcing
this offset provision, the Executive shall have a duty to inform the
Company as to the terms and conditions of any subsequent employment and the
corresponding benefits earned from such employment. The Executive shall
provide, or cause to provide, to the Company in writing correct, complete,
and timely information concerning the same.
4. Participation in Employee Benefit Plans. Unless otherwise
provided, the Executive's participation in any other savings, capital
accumulation, retirement, incentive compensation, profit sharing, stock
option, and/or stock appreciation rights plans of the Company or any of its
subsidiaries shall continue only through the last day of his or her
employment. Any terminating distributions and/or vested rights under such
plans shall be governed by the terms of those respective plans.
Furthermore, the Executive's participation in any insurance plans of the
Company and rights to any other fringe benefits shall, except as otherwise
specifically provided in such plans or Company policy, terminate as of the
close of the Executive's last day of employment, except to the extent
specifically provided to the contrary in this agreement.
5. Incentive Plans. In addition to the payments required by
paragraph 1 of this Section, the Company shall pay to the Executive as
compensation for services rendered cash in an amount equal to the then-
current maximum cash bonus opportunity established under the annual
incentive plan for the bonus plan year in which termination occurs,
adjusted on a pro rata basis based on the number of days the Executive was
actually employed during such bonus plan year (but in no event shall such<PAGE>
maximum cash bonus be less than that in effect for the period immediately
prior to the change of control). In the case of long-term stock incentive
awards represented by restricted shares of stock of the Company, made to
Executive under the Maytag Corporation Employee Stock Incentive Plan (any
prior plan, or successor plan) in lieu of stock under such stock incentive
awards the Executive shall receive a cash payment equal to the aggregate
value of the maximum number of shares for which the Executive holds
outstanding awards, with share value determined at the closing price as of
the date of the change of control. Any payment due pursuant to this
paragraph 5 shall be paid at the same time as the amounts payable pursuant
to paragraph 1 of this Section.
6. Excise Tax-Additional Payment. (a) Notwithstanding anything in
this agreement or any written or unwritten policy of the Company or its
subsidiaries to the contrary, (i) if it shall be determined that any
payment or distribution by the Company or its subsidiaries to or for the
benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this agreement, any other agreement
between the Company or its subsidiaries and the Executive or otherwise (a
"Payment"), would be subject to the excise tax imposed by section 4999 of
the Internal Revenue Code of 1986, as amended, (the "Code") or any interest
or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), or (ii) if the Executive shall otherwise become
obligated to pay the Excise Tax in respect of a Payment, then the Company
shall pay to the Executive an additional payment in an amount to cover the
full cost of any Excise Tax and the Executive's state and federal income
and employment taxes on this additional payment (cumulatively, the "Gross-
Up Payment").
(b) All determinations and computations required to be made under
this section B6, including whether a Gross-Up Payment is required under
clause (ii) of paragraph B6(a) above, and the amount of any Gross-Up
Payment, shall be made by the Company's regularly engaged independent
certified public accountants (the "Accounting Firm"). The Company shall
cause the Accounting Firm to provide detailed supporting calculations both
to the Company and the Executive within 15 business days after such
determination or computation is requested by the Executive. Any initial
Gross-Up Payment determined pursuant to this paragraph B6 shall be paid by
the Company or the subsidiary to the Executive within 5 days of the receipt
of the Accounting Firm's determination. A determination that no Excise Tax
is payable by the Executive shall not be valid or binding unless
accompanied by a written opinion of the Accounting Firm to the Executive
that the Executive has substantial authority not to report any Excise Tax
on his federal income tax return. Any determination by the Accounting Firm
shall be binding upon the Company, its subsidiaries and the Executive,
except to the extent the Executive becomes obligated to pay an Excise Tax
in respect of a Payment. In the event that the Company or the subsidiary
exhausts or waives its remedies pursuant to subparagraph B6(c) and the
Executive thereafter shall become obligated to make a payment of any Excise
Tax, and if the amount thereof shall exceed the amount, if any, of any
Excise Tax computed by the Accounting Firm pursuant to this subparagraph
(b) in respect to which an initial Gross-Up Payment was made to the
Executive, the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount of the
additional Gross-Up Payment to the Executive. All expenses and fees of the
Accounting Firm incurred by reason of this paragraph B6 shall be paid by<PAGE>
the Company.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive
knows of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the thirty-
day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested relating to
such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim,
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this subparagraph B6(c), the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
or the subsidiary shall determine; provided, however, that if the Company
or the subsidiary directs the Executive to pay such claim and sue for a
refund, the Company or the subsidiary shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided, that any extension of the
statue of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, control of the
contest by the Company or the subsidiary shall be limited to issues with<PAGE>
respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d)If, after the receipt by the Executive of an amount advanced by the
Company or the subsidiary pursuant to subparagraph B6(c), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to compliance with the requirements of paragraph
B6 by the Company or the subsidiary) promptly pay to the Company or the
subsidiary the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company or the subsidiary
pursuant to subparagraph B6(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall off-set, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
C.Definitions.
1. "Cause." For purposes of this agreement, Cause shall be determined by
the Board of Directors, in the exercise of good faith and reasonable
judgment, and shall mean the occurrence of any one or more of the
following:
(a) A demonstrably willful and deliberate act or failure to act by
the Executive (other than as a result of incapacity due to physical or
mental illness) which is committed in bad faith, without reasonable belief
that such action or inaction is in the best interests of the Company, which
causes actual material financial injury to the Company and which act or
inaction is not remedied within fifteen (15) business days of written
notice from the Company; or
(b) The Executive's conviction for committing an act of fraud,
embezzlement, theft, or any other act constituting a felony involving moral
turpitude or causing material harm, financial or otherwise, to the Company.
2. Change of Control. For purposes of this agreement, "change of
control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13 (d) (3) or 14 (d) (2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by the Company, (ii)
any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company
or (iii) any acquisition by any corporation pursuant to a transaction which
<PAGE>
complies with clauses (i), (ii) and (iii) of subsection (c) below; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of a least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Normal Retirement. For purposes of this agreement, "Normal
Retirement" shall have the same meaning as provided in the Maytag
Corporation Salaried Retirement Plan; provided, however, that "Normal
Retirement" shall not include terminations of the Executive by the Company
without Cause.
4. Subsidiary. For purposes of this agreement, a Subsidiary shall
mean any domestic or foreign corporation at least 20% of whose shares
normally entitled to vote in electing directors is owned directly or
indirectly by the Company or by other subsidiaries.<PAGE>
D. General Provisions.
1. No Guaranty of Employment. Nothing in this agreement shall be
deemed to entitle the Executive to continued employment with the Company or
its subsidiaries, and the rights of the Company to terminate the employment
of the Executive shall continue as fully as if this agreement were not in
effect, provided that any such termination of employment within two (2)
years following a change of control shall entitle the Executive to the
benefits herein provided.
2. Confidentiality. The Executive shall retain in confidence any
confidential information known to him concerning the Company and its
business so long as such information is not publicly disclosed.
3. Payment Obligation Absolute. The Company's obligation to pay the
Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against him,
her or anyone else. All amounts payable by the Company hereunder shall be
paid without notice or demand. Each and every payment made hereunder by the
Company shall be final and the Company shall not seek to recover all or any
part of such payment from the Executive or from whoever may be entitled
thereto, for any reason whatsoever.
In the event that the cash payment due the Executive under Paragraph
B1 or B5 herein is not paid to the Executive within thirty (30) calendar
days of the Executive's employment termination, such amount due shall
accrue interest (compounded monthly) beginning on the date of employment
termination at a rate equal to the prevailing Prime Rate as determined by
Harris Bank of Chicago, or the Company's then-current primary banking
institution. Further, to the extent this additional amount would be subject
to the Excise Tax, the Company shall pay to the Executive a Gross-Up
Payment, as such terms are described in Paragraph B6 herein.
4. Dispute Resolution.
(a) The Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses which are incurred in good faith
by the Executive as a result of the Company's refusal to provide the
benefits to which the Executive becomes entitled under this agreement, or
as a result of the Company's (or any third party's) contesting the
validity, enforceability, or interpretation of the agreement, or as a
result of any conflict between the parties pertaining to this agreement.
(b) The Executive shall have the right and option to elect (in lieu
of litigation) to have any dispute or controversy arising under or in
connection with this agreement settled by arbitration, conducted before a
panel of three (3) arbitrators sitting in a location selected by the
Executive within fifty (50) miles from the location of his or her job with
the Company, in accordance with the rules of the American Arbitration
Association then in effect. The Executive's election to arbitrate, as
herein provided, and the decision of the arbitrators in that proceeding,
shall be binding on the Company and the Executive.
Judgment may be entered on the award of the arbitrator in any court
having jurisdiction. All expenses of such arbitration, including the fees
and expenses of the counsel for the Executive, shall be borne by the<PAGE>
Company.
5. Successors. This agreement shall be binding upon and inure to the
benefit of the Executive and his or her estate, and the Company and any
successor of the Company, but neither this agreement nor any rights arising
hereunder may be assigned or pledged by the Executive.
6. Severability. Any provision in this agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
7. Entire Agreement. With respect to the subject matter hereof, this
agreement supersedes any prior agreements or understandings, oral or
written, between the parties hereto and contains the entire understanding
of the Company and the Executive.
8. Controlling Law. This agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date set out above.
MAYTAG CORPORATION
By
Chairman & C.E.O.
Leonard A. Hadley
<PAGE>
MAYTAG CORPORATION
Exhibit 12
Ratio of Earnings to Fixed Charges
<PAGE>
MAYTAG CORPORATION
Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands of dollars except ratios)
Year Ended December 31
1998 1997 1996 1995 1994
Consolidated pretax
income from
continuing
operations before
minority interest,
extraordinary item
and cumulative
effect of
accounting changes $ 470,885 $ 300,555 $ 228,237 $ 59,804 $ 241,337
Interest expense 62,765 58,995 43,006 52,087 74,077
Depreciation of
capitalized
interest 2,952 2,530 1,553 1,695 1,772
Interest portion
of rental expense 7,764 6,989 6,448 8,789 10,722
Earnings $ 544,366 $ 369,069 $ 279,244 $ 122,375 $ 327,908
Interest expense $ 62,765 $ 58,995 $ 43,006 $ 52,087 $ 74,077
Interest
capitalized 17 4,191 8,905 2,534 547
Interest portion
of rental expense 7,764 6,989 6,448 8,789 10,722
Fixed charges $ 70,546 $ 70,175 $ 58,359 $ 63,410 $ 85,346
Ratio of earnings
to fixed charges 7.72 5.26 4.78 1.93 3.84
<PAGE>
MAYTAG CORPORATION
Exhibit 21
List of Subsidiaries of the Registrant
<PAGE>
MAYTAG CORPORATION
Exhibit 21
List of Subsidiaries of the Registrant
The following schedule lists the subsidiaries of Maytag Corporation, a
Delaware corporation, as of December 31, 1998.
State or Country
Corporate Name of Organization
Maytag Appliances Sales Company Delaware
D.N. Holdings, Inc. Delaware
Dixie-Narco, Inc. West Virginia
Blodgett Holdings, Inc. Delaware
G.S. Blodgett Corporation Vermont
G.S. Blodgett International Limited Barbados
Pitco Frialator, Inc. New Hampshire
Frialator International Limited England
MagiKitch'n Inc. Pennsylvania
Cloverleaf Properties, Inc. Vermont
Maytag Foreign Sales Corporation Virgin Islands
The Hoover Company Delaware
The Hoover Company (Sales) Delaware
Maytag International, Inc. Delaware
Maharashtra Investment, Inc. Delaware
Hoover Mexicana S.A. de C.V. Mexico
Hoover Holdings Inc. Delaware
Juver Industrial S.A. de C.V. Mexico
Maytag International Limited United Kingdom
Maytag Limited Canada
Maytag Worldwide N.V. The Netherlands Antilles
AERA LIMITED Hong Kong
AERA (Hong Kong) PTE LTD Singapore
Maytag International Investments, Inc. Delaware
Maytag I.I., Inc. Delaware
Maytag International Investments B.V. Netherlands
Hefei Rongshida Co. Ltd. (50.5%) China
Chongqing General Washing Machine Factory China
Anvil Technologies LLC (33.77%) Delaware
NOTE: Ownership in subsidiaries is 100% unless otherwise indicated.
Other subsidiaries in the aggregate would not constitute a significant
subsidiary.<PAGE>
MAYTAG CORPORATION
Exhibit 23
Consent of Ernst & Young LLP
<PAGE>
Consent of Independent Auditors
Shareowners and Board of Directors
Maytag Corporation
We consent to the incorporation by reference in Registration Statement Number
33-8249, Registration Statement Number 33-8248, Registration Statement Number
33-6378, Registration Statement Number 33-22228, and Registration Statement
Number 33-26620 on Forms S-8; and Registration Statement Number 33-35219 on
Form S-3 of Maytag Corporation and in the related Prospectuses of our report
dated February 2, 1999, with respect to the consolidated financial statements
and schedule of Maytag Corporation included in this Annual Report (Form 10-K)
for the year ended December 31, 1998.
Ernst & Young LLP
Chicago, Illinois
March 17, 1999
<PAGE>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 28,642
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<ALLOWANCES> 22,305
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<CURRENT-ASSETS> 968,862
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<CURRENT-LIABILITIES> 790,697
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0
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<COMMON> 146,438
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<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 27,991
<SECURITIES> 0
<RECEIVABLES> 510,127
<ALLOWANCES> 36,386
<INVENTORY> 350,209
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<BONDS> 549,524
0
0
<COMMON> 146,438
<OTHER-SE> 469,371
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<SALES> 3,407,911
<TOTAL-REVENUES> 3,407,911
<CGS> 2,471,623
<TOTAL-COSTS> 2,471,623
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 26,212
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<INCOME-PRETAX> 300,555
<INCOME-TAX> 109,800
<INCOME-CONTINUING> 190,755
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