Maytag turns profit, rebuffs Whirlpool

Maytag turns profit, rebuffs Whirlpool
Date July 22, 2005
Section(s) Local News
(AP) — Household appliance maker Maytag Corp., which is the target of a takeover battle, said today it swung to a second-quarter profit from a year-ago loss, but its results failed to meet Wall Street expectations as higher steel, resin and fuel costs offset improved sales growth.

The earnings report came a day after the Newton-based company rebuffed Whirlpool Corp.’s bid to acquire Maytag. Maytag said its board continues to recommend a competing offer but will still evaluate Whirlpool’s $1.37 billion cash-and-stock bid.

In the statement issued late Thursday, Maytag said its board of directors “was unable to determine” that the Whirlpool Corporation’s cash and stock takeover bid “may reasonably be expected to lead to a financially superior transaction that is reasonably capable of being completed.”

Maytag stated that such a determination was required under the existing $1.1 billion merger offer submitted by investment group Triton Acquisition Holdings, which is led by Ripplewood Holdings, and that such a determination needed to be made before the company could give Whirlpool financial information and start negotiations.

The company said it would continue to evaluate the Whirlpool proposal. A shareholder vote on the Ripplewood-led group is set for Aug. 19.

Whirlpool spokesman Steve Duthie said Thursday night his company had not received a formal response to its proposal.

“Nonetheless, we remain intent on acquiring Maytag,” Duthie said.

Whirlpool CEO Jeff Fettig expounded on the reasons for the company’s interest in Maytag following its earnings release on Thursday where the company saw a 9 percent drop in second quarter profits.

“Our motivation is very simple: This is a great opportunity for us to create value for our shareholders and for our customers, and we believe this because it is potentially a great fit with our strategy,” he said.

Whirlpool believes it “can revitalize the Maytag brands in the marketplace” and can successfully complete the transaction and integrate the companies, he said.

“There really is no other motive or reason for us to pursue this,” Fettig said.

Maytag said net income totaled $3.5 million, or 4 cents per share, from a loss of $41.1 million, or 52 cents per share, a year ago. The latest quarter included charges of 3 cents per share, compared with 61 cents of items last year.

Total sales rose 6.7 percent to $1.23 billion from $1.15 billion last year.

Excluding charges, the company’s 7-cents-per-share profit missed analysts’ expectations for earnings of 10 cents per share, though sales came in above estimates of $1.15 billion, according to a Thomson Financial survey of analysts.

The company said sales were up year-over-year in all major categories of home appliances — refrigerators, laundry, cooking, dishwashers and floor care. Sales of commercial products declined versus a year ago, a result of continued weakness in the vending industry.

Maytag said all Hoover products experienced significant year-over-year growth, with market share gains in upright vacuums as the primary sales driver.

“Compared to last year, operations benefitted from sales growth, a positive mix in major appliances and savings from our ‘One Company’ restructuring and the Galesburg plant closing,” said Maytag CEO Ralph Hake. “However, these improvements were offset by rising raw material costs including steel and resins, higher fuel and transportation costs and lower floor care pricing.”

The company reaffirmed that its full-year earnings are expected to range between 45 cents to 55 cents per share, including about 10 cents in restructuring charges. Analysts on average are currently looking for profit of 54 cents per share.


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