Maytag Corporation reported first-quarter consolidated sales of U.S. $1.219 billion, up 7.3 percent from $1.136 billion in the same period of 2003. Earnings for the quarter met the company's expectations.
First-quarter 2004 reported operating income was $63.6 million, and reported net income was $38.7 million, or $0.49 per share. This includes a benefit of $2.1 million or $0.03 per share for the quarter as a result of the election to record the benefits of Medicare legislation that will provide federal reimbursements for a portion of the company's retiree prescription drug costs.
In the first quarter 2003, Maytag reported $68.2 million in operating income and $34.5 million in net income, or $0.44 per share.
"Our results reflect steady progress on many fronts," Maytag Chairman and CEO Ralph Hake said in a company statement announcing the company's first-quarter performance. "The company's multiple product launch strategy is being well-executed, with new models entering the marketplace on schedule. This successful implementation resulted in strong overall sales growth and market share improvement in Major Appliances. Results in our Major Appliances segment offset declines in the Housewares segment attributable to a reduction in sales of Hoover floor care products."
The company reported that Maytag International and Dixie-Narco vending both performed well in the quarter with innovative new products driving profitable growth. Maytag International has added new channels and customers in key geographic regions.
Hoover, the company said, continues its recovery strategy of becoming cost competitive and launching multiple new products. "While compelling mid-line products are expected to build sales volume starting in the second quarter of this year, Hoover's high-end, distinctly innovative product introductions are scheduled to enter the marketplace in 2005," Mr. Hake said. Hoover's new EmPower(TM) upright, in the mid-price range, began shipping late in the first quarter.
While floor care industry sales increased in the first quarter, most of the growth was at low price points, where Hoover is underrepresented. "Hoover has been restructured for cost improvement and greater flexibility, and the organization has made strong progress in designing and launching new products," Mr. Hake said. "However, after a solid fourth quarter, Hoover struggled with market share and revenue generation in the first quarter."
In the first quarter of 2004 versus the prior year, Maytag experienced higher advertising expenses to support product introductions. Additionally, rising costs of steel, resins, and fuel were challenges in the first quarter and will continue to demand aggressive management, Mr. Hake noted.
In the first quarter, the company made $70 million of the $90 million voluntary pension contributions planned for the full year. Although Maytag has no minimum ERISA funding requirements, at least an additional $20 million in pension contributions are expected to be made later in the year, the company said.
Total pension and post-retirement expense is $2.5 million lower in the first quarter of 2004 versus the prior year as a result of expected returns from higher pension contributions, reduced retiree medical benefits accruals related to a new collective bargaining agreement at Hoover in North Canton, OH, U.S., and the election to record the benefits of Medicare legislation that will provide federal reimbursements for a portion of the company's retiree prescription drug costs. The effect of the subsidy for 2004 is expected to be $8.6 million, which will be recognized evenly throughout the fiscal year. As a result of the election to record the Medicare legislation benefits, Maytag has reduced its accumulated benefit obligation for retiree medical costs by $52.8 million.
Also reflected in first-quarter reported earnings is a reduction of tax expense, net of fees, of $0.03 per share. This is the result of the corporation filing amended returns for prior years following a comprehensive review conducted across the company.
Maytag's Major Appliances segment, which includes Maytag Appliances, Maytag Services, and Maytag International, had first-quarter 2004 sales of $947.3 million, up 14 percent from $830.9 million in the first quarter of 2003. Operating income for the Major Appliances segment, excluding restructuring charges, increased 15.5 percent to $63.0 million compared with $54.5 million a year earlier. Including restructuring charges, operating income increased 21.8 percent to $55.0 million, compared with $45.1 million a year earlier.
Maytag's Housewares segment, which includes Hoover Floor Care and Maytag Housewares, had first-quarter 2004 sales of $178.8 million, down 16.4 percent from $214.0 million in the first quarter of 2003. The company said the decrease is attributable to a substantial reduction in sales of floor care products in the first quarter of 2004 when compared to the same period last year. Based on a consumer shift to products at lower price points, a decline in floor care revenues accelerated in the second quarter of 2003. Operating income for the Housewares segment decreased 35.8 percent to $19.0 million compared with $29.6 million a year earlier.
The Commercial Products segment, which includes Dixie-Narco Vending, Maytag Specialty, and Maytag Commercial Laundry, had first quarter 2004 sales of $92.9 million, up 1.9 percent from $91.2 million in the first quarter of 2003. Operating income for the Commercial Products segment decreased 25.6 percent to $3.9 million compared with $5.3 million a year earlier. While Dixie-Narco performed well, the company said this was offset by a poor performance by Jade Products commercial cooking business, attributable to higher stainless steel prices, increased product development costs, and production inefficiencies.
Mr. Hake reaffirmed that for the full-year 2004, excluding restructuring charges of approximately $0.40 per share related primarily to the planned closing of the Galesburg, IL, U.S. plant, Maytag Corporation expects earnings of $2.30 to $2.40 per share.
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