Maytag today reported third quarter consolidated net sales of U.S. $1.26 billion, up 6.5 percent from net sales of $1.19 billion in the same period last year. Reported net loss for the third quarter was $18.2 million or $0.23 per share, compared with net income of $7.5 million, or $0.09 cents per share, a year earlier.
Maytag Corporation, based in Newton, Iowa, U.S., said third quarter home appliance net sales were up 6.7 percent, driven largely by increases in major appliances net sales. In addition, Maytag Services continued to show strong revenue growth versus a year ago. Compared to the prior year period, net sales of floor care products in the third quarter were down despite an increase in unit sales, and Maytag blamed the net sales decrease on a continued decline of floor care product pricing and mix. Commercial Products net sales were up 2.5 percent compared to the same period last year.
"Despite the top-line sales successes, our excess manufacturing capacity in some product categories continues to worsen as consumer demand shifts to our products that we source from lower cost manufacturers," said Maytag Chairman and CEO Ralph Hake. "Also, higher raw material and transportation costs primarily driven by increases in oil prices negatively impacted the quarter."
In addition to these expenses, $8.5 million of net merger-related expenses impacted the quarter. Maytag plans a merger with appliance maker Whirlpool Corporation that could happen as early as the first quarter of 2006.
"Maytag experienced strong growth in key product categories and that again is indicating that consumers and our trade partners believe in and are purchasing the Maytag family of quality products and brands," said Hake. "During the quarter, there were strong sales gains in refrigeration and laundry, as well as solid growth in Jenn-Air branded appliances."
Hake added, "Our performance demonstrates the need to urgently address our specific excess manufacturing capacity issues and eliminate these barriers to cost competitiveness and acceptable financial performance. We remain committed to address these issues. The actions we take could include restructuring charges, asset impairments and/or accelerated depreciation related to the affected operations and certain cash costs. We continue to analyze various alternatives to address these structural costs."
The company also said that a new asset-based $600 million five-year, senior secured revolving credit facility is expected to close early in the fourth quarter. The new facility will replace the current $300 million credit facility. The new credit facility is expected to provide Maytag with substantially more financial capacity and flexibility to meet its 2006 debt maturities and its long-term financing requirements. Maytag would have the ability to increase the new credit facility by $150 million to $750 million.
On August 22, 2005, Maytag and Whirlpool signed a definitive merger agreement in which Whirlpool will acquire all outstanding shares of Maytag in a cash and stock merger. A preliminary prospectus/proxy statement was filed with the U.S. Securities and Exchange Commission (SEC) and both companies say they are working with the Antitrust Division of the U. S. Department of Justice in its review of the proposed merger. Maytag and Whirlpool continue to expect the transaction to close as early as the first quarter of 2006, following approval from Maytag stockholders and regulatory clearance.
The Maytag board of directors has scheduled a special meeting of stockholders for December 16, 2005, to consider and vote on the adoption of the merger agreement. Stockholders of record of Maytag as of November 2, 2005, will be entitled to vote on the transaction.
Maytag's net sales in the first 9 months of 2005 were $3.66 billion, up 2.9 percent from net sales of $3.56 billion in the first 9 months of 2004. Operating income was $43.2 million, down 7.4 percent from $46.6 million reported in the same year-earlier period. Last year, operating income was negatively impacted by an $18.5 million charge for front-load washer litigation and nearly $55 million of restructuring and related charges, compared to about $11 million in the current year.
Reported net loss for the first nine months of 2005 was $7.0 million, or $0.09 cents per share. In the first nine months of 2004, Maytag reported net income of $5.1 million, or $0.06 cents per share.
For the first 9 months of 2005, cash flow used in operations was $29.6 million, compared to cash flow provided by operations of $107.7 million for the first 9 months of 2004. Cash flow was impacted by a larger increase in working capital in the current year as well as cash payments on restructuring charges and litigation-related charges paid in the current year, but recorded in the prior year. The company also said that it has already made $50 million in voluntary contributions to the qualified pension plan this year. For the remainder of 2005, the company does not expect to make additional contributions.
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