Maytag Corporation (Newton, Iowa, U.S.) said that results for the third quarter and full-year 2005 will be significantly lower than expected in its earlier guidance. Maytag blamed the results on higher costs -- high manufacturing overhead, increasing distribution and fuel expenses, and rising raw material costs.
"Although we are disappointed in these cost increases, our top-line sales projections are strong compared to last year," noted Maytag Chairman and CEO Ralph F. Hake. He pointed out that, despite uncertainty over Maytag's pending sales, it achieved high single-digit sales growth in major appliances through the first 2 months of the third quarter. He also noted that excess manufacturing capacity remains one of the biggest issues impacting Maytag's earnings.
"Our fixed cost structure remains a barrier to acceptable financial performance, and we intend to address this issue," Hake said. "The actions we take might require restructuring charges, including asset write-offs, accelerated depreciation and certain cash costs. These actions will need to be undertaken irrespective of the pending merger with Whirlpool."
An unfavorable product/pricing mix, primarily in floor care, also continues to hurt results. The pending acquisition by Whirlpool leads Maytag to expect significant merger and acquisition expenses in the third and fourth quarters of this year. As a result, Maytag projects that full-year 2005 results will be significantly lower than the guidance it previously provided, and it expects to report a loss before any restructuring charges in the third quarter.
Due to the current business performance and uncertainty associated with the manufacturing restructuring, Maytag said it will no longer provide any earnings guidance.
Given that the merger with Whirlpool may not close prior to the first quarter of 2006, Maytag will move forward to complete the new asset-based, U.S. $600 million, 5-year senior secured revolving credit facility contemplated by the commitment letter, as announced by Maytag in June 2005. It expires Dec. 30, 2005. The new facility will replace the current $300 million credit facility and it is expected to be completed early in the fourth quarter of 2005. The new credit facility is expected to be led by J.P. Morgan Chase Bank, N.A. and Citigroup Global Markets, Inc. and secured by accounts receivable and inventory of some Maytag subsidiaries.
Maytag plans to announce third quarter 2005 sales and earnings results on Friday, Oct. 21, 2005.
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