Business Report
Contents || Corporate Listings
Maytag Corporation Posts Record Sales, Earnings for 1998. Innovative new home and commercial products, plus favorable economic conditions in the United States and expanded business relationships with key customers, helped drive Maytag's sales and earnings to record levels in 1998.
Consolidated sales in 1998 were a record $4.1 billion, up 19 percent from sales of $3.4 billion in 1997. Operating income increased 46 percent to $522.7 million and represented an operating margin of 12.8 percent. Operating income in 1997 was $358.3 million and the operating margin was 10.5 percent.
Net income for 1998 was a record $280.6 million, up 56 percent from $180.3 million in 1997. The income figures are after a $5.9 million charge for the early retirement of debt in 1998 and a $3.2 million charge for early debt retirement in 1997.
Diluted earnings per share in 1998, after extraordinary items, amounted to $2.99, up 63 percent from $1.84 in 1997. There were 4 percent fewer shares outstanding in 1998 due to the company's ongoing share repurchase program.
Maytag's home appliances segment, which includes major appliances and floor care products, posted record 1998 sales of $3.5 billion, up 15 percent from sales of $3 billion in 1997. Operating income for the segment was $505.1 million, up 44 percent from $351.7 million a year earlier.
The commercial appliances segment, which includes Dixie-Narco vending equipment and Blodgett commercial cooking products, had 1998 sales of $458 million and operating income of $49.8 million. In 1997, the segment had sales of $249.4 million and operating income of $19.4 million. Blodgett did not become part of Maytag until the fourth quarter of 1997.
Rongshida-Maytag, the corporation's joint venture in China, had 1998 sales of $128.4 million and operating income of $5.9 million. The latter was negatively impacted by economic and competitive factors in China and some start-up expenses associated with a new refrigerator manufacturing facility. In 1997, the joint venture sales were $122.9 million and the operating income was $11.6 million.
Share Repurchase Continues; Dividend Increased. Maytag's strong financial performance in 1998 enabled the corporation to be aggressive in its share repurchase program. During the year, 6.3 million shares of stock were repurchased. Maytag began its stock repurchase plan in late 1995, and through the end of 1998 a total of 22.1 million shares had been repurchased.
In 1998 Maytag shareowners saw the value of their investment increase through significant stock price appreciation, and in September the corporation increased the quarterly dividend on its common stock from 16 to 18 cents a share.
Maytag remains committed to improving shareowner value. In February 1999, the board of directors authorized an additional 10 million shares for repurchase. The corporation plans to continue its repurchase program during the year, consistent with sound financial judgment and other investment opportunities.
Hoover Innovation Sparks Record Performance. Hoover capped its 90th anniversary year by posting record sales and operating income in 1998. The floor care industry reported record unit shipments in 1998, driven primarily by upright vacuum cleaner sales. Hoover significantly out-paced the industry in upright sales and gained market share in that, and other, product categories.
Product innovation is the linchpin of Hoover's continued leadership in the industry. It's the strategy the company uses to improve product performance and develop meaningful, distinct features that make cleaning easier. That, in turn, gives consumers valid reasons to step up to Hoover's higher featured, higher priced, more value-added products.
Hoover entered 1998 with great momentum generated by the innovative WindTunnelTM upright vacuum cleaners and the top-of-the-line SteamVac UltraTM deep cleaner, both of which were introduced in the third quarter of 1997. Sales of those products continued strong for the full 12 months of 1998.
WindTunnelTM vacuums use a design and technology patented by Hoover to deliver superior cleaning performance. In early 1998, the company introduced commercial cleaners with the same technology, and later in the year Self Propelled WindTunnelTM models for home use entered the market.
Hoover added another price point at the upper end of its extractor line when it rolled out the SteamVac PlusTM in 1998 and, for the first time, a SteamVacTM extractor was added to Hoover's stable of commercial floor care products.
New upright vacuum cleaners in the mid-price segment of Hoover's line were introduced in 1998. These models feature Soft GuardTM, a cushion-like material that wraps around the front of the cleaners and protects furniture, and all models have high-efficiency allergen-filtration. Since furniture is a major investment for hotels, restaurants and other high-traffic institutions, in the fall of 1998 Hoover brought out commercial vacuums with the Soft GuardTM feature.
Hoover also revamped its line of canister vacuum cleaners in 1998, adding new features and allergen-filtration bags on most models. Canister type cleaners historically have been popular with consumers who have non-carpeted areas in their homes, and the trend today is toward the use of more hardwood and flooring materials other than wall-to-wall carpeting.
Responding further to the trend toward hard-floor surfaces, Hoover introduced its FloorMAXTM machine in late 1998, which is an easy-to-use product that effectively cleans a variety of surfaces. This product dispenses a cleaning solution, scrubs the floor and then picks up the solution, leaving the floor squeegee-dry.
To reach out to the rapidly growing consumer audience on the Internet, Hoover launched its web site in 1998 at http://www.hoovercompany.com. Visitors to the site will find product information, owners' manuals, a listing of Hoover Service Centers, a listing of nearby stores where products can be purchased, and other company information. Vacuum cleaner bags, belts and other accessories, as well as certain Hoover cleaners, can be purchased through the web site.
In 1999, Hoover will continue to reinforce its market leadership position by focusing on its key strategies of product innovation, organization and operational excellence, and business diversification. The company has elevated the concept of shorter product development cycles to new heights, and in 1999 it will introduce more new products in more product categories than ever before. Additionally it will receive a full-year benefit from all the new products introduced in 1998.
As Hoover enters its 10th decade, its business objective remains unchanged: Give consumers products with excellent cleaning effectiveness and convenience features that simplify and speed up the cleaning process.
Maytag Appliances Gains Share in Strong Industry. Industry-wide unit shipments of washers, dryers, dishwashers, ranges and refrigerators in the United States rose 8.6 percent in 1998, setting another record. Maytag's major appliance volume growth once again out-performed the industry. Recent product innovations, new distribution initiatives and a very favorable economic environment helped Maytag Appliances score market share gains in all major product categories. Dollar sales and operating income for the division rose to record levels in 1998.
Maytag received a full year's benefit in 1998 from 1997 product introductions like the sensational Maytag NeptuneTM high- efficiency, horizontal-axis washer and matching dryer; the commercial high-efficiency washer; redesigned refrigerators with top-mounted freezers; new dishwasher models; and additions to range lines.
Maytag first introduced the revolutionary NeptuneTM washer and its companion dryer in March of 1997. In a matter of months, the high-efficiency washer became one of the best-selling models in the industry, and sales were strong for the full 12 months of 1998. The NeptuneTM washer commands a premium price because of its superior performance: better stain removal, gentle treatment of clothing, significant water and energy saving, large tub capacity and ease of use.
The 1997 redesigned refrigerators with top-mounted freezers helped drive growth in 1998. These units reward consumers with enhanced performance, innovative storage features and increased internal capacity without increased floor space.
Redesigned dishwasher and range lines in 1997 also provided consumers with more features and performance characteristics they wanted, and this helped increase full-year 1998 sales of these products.
The focus on innovation continued in 1998. Early in the year, totally redesigned refrigerators with side-mounted freezers moved into the market under the Maytag®, Jenn-Air®, Magic Chef® and Admiral® brands. Like the 1997 redesigned refrigerators with top-mounted freezers, these new side-by-sides offer consumers superior performance and innovative features. They helped grow the corporation's refrigerator sales in 1998, and they'll contribute to performance for the full year 1999.
A Maytag high-efficiency, horizontal-axis washer with a dryer stacked on top was introduced in 1998. It has all the benefits of a side-by-side high-efficiency washer and dryer, but it occupies only half the floor space. Commercial high-efficiency "stacked" models are also available. 1998 also saw the introduction of dishwashers with a sanitization feature and new cooking appliances with the quality, features and performance consumers want. In 1999, Maytag Corporation's major appliance business will benefit from a full 12-month sales of these products.
In addition to product innovation, another key strategy at Maytag Appliances is increasing business relationships with key customers. In early 1998, Sears began carrying Maytag brand appliances in its stores throughout the United States, and later in the year, Sears Canada became a Maytag brand dealer. Neither of these large retailers had carried the Maytag brand before. During 1998, Maytag Appliances also strengthened and expanded its business with Best Buy, Circuit City, Heilig-Meyers, Lowe's, various buying groups, regional appliance retailers and Maytag Home Appliance Centers.
1998 was another record year for Maytag commercial laundry equipment, with both unit volume and revenue exceeding the records set in 1997. The records of 1998 were driven by increased business with commercial distributors, route operators and on-premise laundry operators. The Maytag commercial high-efficiency washer continues to be very popular, and in 1999 the stacked version of this product will contribute to sales for a full 12 months.
Maytag Appliances' strategic focus on profitable growth through intelligent product innovation continues in 1999. In the first quarter, totally redesigned Maytag top-loading, vertical-axis washers went into production. They feature a larger tub, improved wash action and easier loading and unloading. Early in the year, Maytag Appliances also unveiled feature enhancements to refrigerators with top-mounted freezers, new Maytag and Magic Chef ranges, a Jenn-Air radiant downdraft cooktop and a uniquely styled Jenn-Air curved glass wall oven.
Many other exciting product changes are planned for 1999 as Maytag continues to lead the way in major appliance innovation.
Dixie-Narco Sales Up; New Products Introduced. 1998 was an outstanding year for Dixie-Narco. Demand was strong for all its refrigerated beverage vending equipment, with particular strength noted in enhanced capacity venders. Dixie-Narco expanded its manufacturing facilities, increased employment, and in April the company began producing a new glass-front vending machine. This Beverage MaxTM vender displays and vends up to 45 different product selections, and its flexible features enable it to vend many different beverage products.
Late in 1998, Dixie-Narco began manufacturing the new Coca-Cola Marketing Vender, which presents new graphic styling, and it accommodates the variety of package sizes consumers want. This new unit, plus the Beverage MaxTM vender, will benefit Dixie-Narco's business for the full year 1999.
Blodgett Reorganizes Sales and Marketing to Enhance Customer Focus, Innovation. To expand the commercial side of its business, Maytag acquired G.S. Blodgett in October 1997, a leading manufacturer of commercial ovens, fryers, charbroilers and other food service equipment. Its customers include major hotel and restaurant chains, independent restaurants, institutions and other food service installations. In addition to Blodgett® Ovens, the division's products are marketed under the Pitco Frialator®, MagiKitch'n® and Blodgett Combi® brand names. Its products hold the number-one or number-two market position in each product category.
1998 was a year of reorganization for Blodgett. In April, Glenn Kelsey joined the Maytag team as president of Blodgett. An experienced executive in the food service industry, he spearheaded a major restructuring of Blodgett's sales and marketing organization. These functions for all brands have been consolidated to strengthen the division's customer focus and deliver accelerated product innovations.
Blodgett, headquartered in Burlington, Vermont, celebrated its 150th anniversary of service to the food service equipment industry in 1998. Like other members of the Maytag family, Blodgett marches into the future with a heritage of strong brands and industry leadership positions.
Maytag/TurboChef Alliance Targets Rapid-Cook Products. Maytag's strategic business alliance with TurboChef Technologies is progressing well. TurboChef designs high-speed cooking systems for commercial kitchens. The technology used enables foods to be prepared in one-fifth to one-tenth the time of conventional cooking processes, without sacrificing taste, appearance or nutritional value. This is extremely important to both commercial and residential customers.
Maytag's alliance with Dallas-based TurboChef is aimed specifically at developing a rapid-speed cooking product for home use.
Maytag International Sales Up in 1998; China Joint Venture Launches Refrigerators. Maytag International manages the corporation's export sales, international licensing agreements, the manufacturing of Hoover washers in Mexico and Maytag's majority ownership interest in Rongshida-Maytag, a joint venture in China.
Maytag International's export sales of major appliances and floor care products produced in the United States increased significantly in 1998. Refrigerators, laundry equipment and floor care products showed the most growth, and exports were strongest to Europe, Latin America and the Middle East. A Maytag NeptuneTM washer for export was introduced in the second half of 1998 and received an enthusiastic response. Hoover added to its export models with international versions of a WindTunnelTM upright vacuum cleaner and a SteamVacTM extractor.
Hoover Mexicana had a strong year because of sales of a twin-tub washer imported from Rongshida-Maytag in China, a new washer model manufactured at the Hoover plant in Mexico, and the continued growth of products imported from the United States.
Rongshida-Maytag had increased sales in 1998, but its operating income was negatively impacted by economic and competitive factors later in the year and by costs associated with opening a new refrigerator manufacturing facility. During 1998, several new models of RSD washers were introduced, and the joint venture acquired another washer manufacturer, which is located in southwest China. In 1999, new RSD brand refrigerators began moving into the Chinese market and additional models will be introduced later in the year. From a broader perspective, the joint venture faces many uncertainties associated with the economic environment in China and the Asian region.
Maytag Acquires Manufacturer of Ultra-Premium Cooking Products. Continuing to invest for profitable growth beyond its existing business portfolio, Maytag acquired Jade Range in the first quarter of 1999. Jade is a California-based manufacturer of ultra-premium commercial ranges and refrigeration units under the JadeTM brand and commercial-style ranges and outdoor grills for the residential market under the DynastyTM brand. Its sales in 1998 were approximately $20 million. Maytag acquired the privately held company for approximately $20 million in a cash and stock transaction.
The acquisition by Maytag is another strategic step to invest in high-end brands and expand the corporation's home and commercial product lines. Under Maytag, the operation will be known as Jade Products Company. The business was founded in 1975 and has approximately 160 employees. Its products are sold to food service operators through dealers and to residential customers through distributors.
Honors, Awards Recognize Maytag's Operations, Products. Over the past year, the corporation's operations and products have received numerous honors and awards.
Maytag was ranked 135th on the Forbes Platinum 400 list, which appeared in the January 11, 1999, issue of the magazine. The list is described as being the 400 best-performing companies in the United States. Selections are based on Forbes' evaluations of sales growth, net income and return on capital over the last 12 months and the past five years.
The February 1999 issue of Consumer Reports magazine rated two Maytag® refrigerators number one in their respective categories. The overall scores took into account energy efficiency, temperature performance, quietness and convenience. In March 1998, Consumer Reports rated various Hoover® vacuums in four of the top 10 positions in floor care products, and the May 1998 issue of the magazine rated four models of Maytag® and Magic Chef® electric ranges number-one or number-two.
Wal-Mart presented Hoover with its Supplier of the Year Award for 1998 in the electrics category. Hoover also was named a Sears Partner in Progress for the second year in a row. The award is presented to top vendor companies that supply Sears with quality products and services. For the third straight year, Hoover earned the top Supplier Performance Award in floor care, which is based on a survey of buyers and merchandise managers at the top 100 discount chains. Hoover also received vendor awards from Ames Department Stores Inc. and ShopKo Stores Inc., among other major retailers.
The Maytag NeptuneTM high-efficiency washer continued to sweep in awards during 1998. The American Council for an Energy Efficient Economy recognized Maytag "for its vision and dedication in developing and marketing the washer." Maytag Corporation was recognized by the U.S. Department of Energy and the Environmental Protection Agency as the 1998 Energy Star Appliance Partner. The award recognizes efforts "to curb energy waste and to educate consumers about efficiency through Energy Star programs." The Maytag NeptuneTM washer also was recognized as part of Emerson Electric's Technology Awards Program, and the washer received the Iowa Industry Award for innovative product development.
Corporate, Division Information Available on Internet Sites. The corporation continues to make more information about its operations and products available on various web sites.
Persons interested in financial and business information can visit Maytag Corporation's home page at www.maytagcorp.com. To learn about Maytag brand products, the address is www.maytag.com, and Jenn-Air brand information is located at www.jennair.com. Jade Products Company has a web site for its home products at www.dynastyrange.com. Information on Hoover's floor care products can be found at www.hoovercompany.com. Maytag International's web site is www.maytaginternational.com.
Web sites for the corporation's commercial cooking products are located at www.blodgettovens.com, www.blodgettcombi.com and www.magikitchn.com.
Business Outlook: Expectations for Continued Profitable Growth in 1999. Maytag's business plan for 1999 centers around more Intelligent InnovationSM aimed at superior product performance. Innovation enables Maytag to deliver value-added products to the marketplace, provide notable benefits to consumers and commercial customers, and make everyday living simpler at home and at work.
In 1999, the corporation will realize a full 12-month benefit from its 1998 product innovations and its expanded product distribution channels. New products that were introduced in the first several months of 1999 will contribute to performance later in the year.
Assuming continued favorable economic conditions during 1999, Maytag should continue to outperform the industries in which it competes and deliver another year of solid growth in sales and earnings. Additionally, the corporation will continue its stock repurchase program and its investment in future product innovation.