Maytag Reports 48-Percent Increase in Third Quarter
Oct 15, 2002
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Maytag Corporation's third quarter 2002 comparative earnings per share grew 48 percent to U.S. $0.71 per share on net income of $55.6 million. Operating income for the quarter rose to $100.4 million, excluding an $8.3 million gain on a distribution center sale, while sales for the quarter rose 3 percent to $1.168 billion, compared with the same quarter of 2001. Reported net income for the period, including the gain on the distribution center sale, was $60.8 million, or $0.77 per share.
Results for 2001 have been restated to reflect the China joint venture and foodservice business as discontinued operations and a new accounting standard that required reclassification of certain promotional expenses as a reduction to sales rather than a selling expense.
In the third quarter of 2001, which included two months of the acquired Amana appliance business, Maytag reported operating income of $79.7 million, on sales of $1.133 billion. A year ago, third quarter comparative net income was $37.5 million, or $0.48 per share, including goodwill amortization of $0.03 per share. Maytag reported a third quarter 2001 net loss of $29.7 million, or a loss of $0.38 per share, that included special items. The special items included an $0.80 loss on discontinued operations, consisting of a non-cash charge of $0.77 per share related to the sale of Blodgett, and $0.03 per share related to losses on discontinued operations. Additionally there was a charge of $0.07 per share for the early retirement of debt.
Discussing the company's performance, Maytag's Chairman and CEO Ralph F. Hake said, "We continue to see dramatic improvements in year-over-year performance despite what is admittedly a challenging environment for home appliances. On a limited sales increase of 3 percent for the quarter, our net income was up 48 percent, excluding the one-time gain, and our operating margins improved from 7 percent a year ago to 8.6 percent. Through the first three quarters, our sales are up 15 percent and our comparative net income is up 79 percent. Operating margins have improved from 7.2 percent to 9.3 percent year to date. This reflects our rapid integration of Amana and aggressive cost reduction actions.
"We have reason to be optimistic about our pipeline of innovative new products. The tall-tub, three-rack dishwasher is now in full distribution and orders are exceeding our expectations. Production is under way on the refreshed line of Maytag brand Atlantis washers and dryers, and these products will start moving into the marketplace in early November. In addition, the totally redesigned Hoover WindTunnel V2 upright vacuum and the all-new SteamVac V2 deep cleaner are now widely available at retail."
However, he noted, "In the fourth quarter we will continue to see slower industry sales and lower production rates on some home appliances and, as expected, Dixie-Narco's business is traditionally slower in the fourth quarter. Maytag's competitiveness will benefit greatly from the company's recently announced decision to relocate refrigeration production in late 2003 and 2004, but the closing of Maytag's refrigeration plant in Galesburg, Ill., will result in fourth quarter restructuring and other charges."
In connection with the plant closing, Maytag expects to record pre-tax restructuring charges in the range of $140 million to $160 million, of which $70 to $80 million are expected to be recognized in this year's fourth quarter. The remainder will be recognized in 2003 and 2004. Approximately $50 million of the total restructuring charges will be cash items, largely in 2004.
Considering the known factors, Hake said, "We're expecting fourth quarter income from continuing operations to be about 60 cents per share, excluding the restructuring and other charges. That would be significantly ahead of last year's 48 cents per share, excluding special items. For the full year 2002, our normalized earnings per share from continuing operations should be about $2.92 per share, a 65 percent improvement from $1.77 per share in 2001.
"With that significant improvement in profitability and performance, our cash flow is strong and we're on target to reduce debt by $200 million this year, while substantially increasing discretionary cash contributions to our pension plans. At the same time, we're implementing our future product plans, which are progressing well, and will continue to be supported by research and development funding and capital spending."
In looking at 2003, Hake said, "Next year, we'll reap the benefit from this year's new products. Other exciting new products will come to market next year, and we'll continue our aggressive drive to reduce costs. We will also be re-tooling our cooking products plant in Florence, S.C. to produce a new laundry product and the current products manufactured in Florence will be redesigned for production at our main cooking products plant in Cleveland, Tennessee. For 2003, we're expecting top-line revenue growth and we anticipate income from continuing operations in the range of $3.10 to $3.20 per share, excluding the impact of relocating refrigeration production."
Maytag's home appliances segment, which includes major appliances and floor care products, had third quarter 2002 sales of $1.101 billion, up 3 percent from $1.073 billion in the third quarter of 2001. Operating income for the segment, excluding the gain on the distribution center sale, was $104.5 million, compared with $85.2 million a year earlier.
The corporation's commercial appliances segment, composed of Dixie-Narco vending equipment and Jade products, had third quarter sales of $66.8 million, up 11 percent from $59.9 million in the third quarter of 2001. The segment reported operating income of $6 million, compared with $2.9 million in last year's third quarter.
Maytag's sales in the first 9 months of 2002 amounted to $3.539 billion, up 15 percent from sales of $3.086 billion in the first nine months of 2001. Operating income, excluding the gain on the distribution center sale, was $329.5 million, up 49 percent from $220.7 million in the year-earlier period.
Comparative net income in the first nine months of this year was $182 million, or $2.32 per share. Reported net income, which included a loss from discontinued operations and the gain on the distribution center sale, was $185.5 million, or $2.36 per share. An accounting standard change pertaining to goodwill added $0.09 a share to net income for this year's 9-month period.
In the first 9 months of 2001, Maytag's income from continuing operations, excluding special items, was $101.7 million, or $1.30 per share. Including the 2001 special items, Maytag's net income in the first nine months of last year was $68.4 million, or $1.68 per share.
Maytag's home appliances segment had nine-month sales of $3.337 billion, up 15 percent from sales of $2.894 billion in the first nine months of 2001. Operating income for the segment, excluding the gain on the distribution center sale, was $351.3 million, up 46 percent from $240.5 million in last year's nine-month period.
The commercial appliances segment reported nine-month sales of $202 million and an operating income of $14.9 million. In the first nine months of 2001, commercial sales were $192.5 million and operating income for the segment was $10.1 million.
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