Maytag Corporation announced today its first-quarter sales and earnings were down from the first quarter of last year. The company also announced a cost-reduction plan, which includes eliminating about 500 jobs and is expected to result in 2003 savings of approximately U.S. $20 million. This savings is part of the company's total anticipated expense reductions of $40 million this year.
Maytag reported first-quarter consolidated sales of $1.136 billion and operating income of $68.2 million. Reported net income was $34.5 million, or $0.44 per share. Included in these results were pretax charges of $9.4 million, or $0.08 per share, for the closing of the company's manufacturing plant in Galesburg, IL, U.S. The company also incurred approximately $3.5 million of costs associated with previously announced product recalls.
A year ago, first quarter 2002 consolidated sales were $1.178 billion and operating income was $107.2 million. Net income for the period, including a $1.3 million loss from discontinued operations, was $56.8 million, or $0.73 per share.
"Industry-wide sales of floor care products were down dramatically in the first quarter, and sales volume, pricing and mix of our Hoover floor care products sharply declined," said Ralph F. Hake, Maytag chairman and CEO. "Our major appliance sales were also less than expected in an industry that was down 1.8 percent. Cost increases for steel, pension and health care were expected to be offset by cost reductions, but these actions were insufficient in the first quarter."
Mr. Hake said the company remains committed to improving performance by introducing innovative new products in nearly all categories this year, and through aggressive cost improvements. He also pointed to a favorable first quarter performance in the company's commercial segment, driven by increased sales of Dixie-Narco glass-front venders and revenues from machine refurbishing and currency changing equipment.
On the cost side of the equation Mr. Hake said, "We have been prudent in managing inventories, and we have multiple initiatives in place that will help offset cost increases as we move further into the year. Additionally, during the second quarter we will streamline the corporation by eliminating about 500 jobs, or 8 percent of our salaried positions."
Maytag currently has approximately 20,900 employees and about 6,400 are in salaried positions. Mr. Hake indicated that nearly all company operations will be involved in the restructuring and, when completed, it is expected to generate current-year savings of about $20 million. Mr. Hake said the $20 million restructuring savings this year is part of the company's plan to reduce expenses by a total of $40 million in 2003 through cost-savings initiatives in logistics, benefits, recurring expenses and other areas. The annualized savings from the restructuring and other cost-savings initiatives are expected to be approximately $65 million. The company will incur second quarter charges of approximately $20 million associated with the salaried workforce restructuring.
Looking ahead, Mr. Hake said, "We expect business conditions to remain challenging in the second quarter. We will stay focused on bringing new products to market, lowering our costs, and funding product innovation that is vital to our success. In addition, our cash flow will continue to be targeted to further reducing debt and funding our pension plan.
"At this point, we're expecting full-year 2003 reported earnings to be in the range of $1.80 to $1.90 per share, which includes pretax special charges of approximately $60 million, or 50 cents per share, for the Galesburg closing and salaried workforce restructuring."
First Quarter Segment Results
Maytag's home appliances segment, which includes major appliances and floor care products, had first quarter 2003 sales of $1.074 billion, down 4 percent from $1.119 billion in the first quarter of 2002. Operating income for the segment was $77.8 million, compared with $119 million a year earlier. Current year operating income includes a $9.4 million Galesburg-related charge.
The corporation's commercial appliances segment, composed of Dixie-Narco vending equipment and Jade Products, had first quarter sales of $62.2 million, up 6 percent from $58.4 million in the first quarter of 2002. The segment reported operating income of $2.1 million, versus $1.3 million in last year's first quarter.
Maytag will host a conference call today, April 16, to discuss its business performance with members of the investment community. The call will also be broadcast live over the Internet.
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