"Within our Major Appliances segment, Maytag Appliances underperformed because of material costs, under-absorbed burden and the strike at our Newton, Iowa, facility"
Ralph Hake, chairman and CEO

Maytag (MYG) today reported second quarter consolidated sales of $1.15 billion, down 1 percent from $1.16 billion in the same period of 2003.

Lower Hoover floor care sales as well as higher material costs and lower burden absorption negatively affected reported results compared with prior year. Also impacting second quarter results were contingent liabilities recorded for pending litigation, restructuring charges, and a goodwill impairment charge. Reported net loss for the second quarter of 2004 was $41.1 million, or 52 cents per share, as compared with net income of $25.2 million or 32 cents per share in 2003.

Contingent liabilities for pending litigation recorded in the second quarter include an increased reserve for early generation front-load washer litigation and for an adverse judgment involving the termination of a commercial distributorship for Amana products that occurred prior to Maytag's acquisition of the Amana business.

The second quarter earnings (loss) per share for 2004 and 2003 included the following items:

Commenting on the second quarter, Maytag chairman and CEO Ralph Hake stated, "Our operational performance was disappointing. The Housewares segment loss had the largest impact because we anticipated a recovery at Hoover floor care. Within our Major Appliances segment, Maytag Appliances underperformed because of material costs, under-absorbed burden and the strike at our Newton, Iowa, facility. However, several major risks have been addressed, including the Newton work stoppage and costs related to early generation front-load washer litigation. Our 'One Company' cost savings plans, which will lower our cost structure dramatically, are on track."

Sales decreased in the Commercial Products segment, primarily due to a decline in the vending industry. In addition, continued performance issues at Jade resulted in a goodwill impairment charge.

Maytag Appliances' sales increased in the second quarter but less than industry unit growth of 9.7 percent. "In the second quarter we gave back our first quarter branded market share gains, and some OEM share. We expect sales to improve in the last half of the year as we introduce new products, which customers are anticipating," Hake commented.

Hake noted that the new contract ratified by union employees of Maytag's Newton Laundry Products operations, which followed a three-week work stoppage, provides an improved cost structure and a continuation of supply. The financial impact of the work stoppage to the second quarter exceeded $5 million in direct costs. A contract with union employees at Maytag's Amana, Iowa, Refrigeration Products plant will expire in September. Maytag's Galesburg, Illinois, Refrigeration Products plant is scheduled to cease production in September, and the company's new Reynosa, Mexico, refrigeration plant is operational.

"In refrigeration, there is strong demand for the new Jenn-Air French door bottom-freezer model, and new Amana and Maytag French door bottom-freezer models are being launched in the second half. In laundry, Neptune top-load laundry is selling well; the Neptune Drying Center is seeing a sales lift with our recent incentives, and we expect the new Maytag under-counter laundry products, sourced from Samsung, to be well-received when they are launched this fall. In cooking, new Jenn-Air and Maytag double oven ranges and other refreshed models are planned to be in the marketplace in the third quarter," Hake said.

In addition to the new product launch schedule, Hake said other positive trends include Maytag International's good performance as it expands its customer base in key markets, and Maytag Services' continuing growth with its all-brand service and parts programs.

In June, Maytag announced a comprehensive restructuring expected to yield $150 million in annual cost savings. The restructuring, which will consolidate the Hoover floor care business, Maytag Appliances' business and corporate headquarters organizations, is expected to lower the company's cost structure and increase marketplace competitiveness. The restructuring is on track for completion by year-end.

Hoover continues to be challenged by loss of market share. "Our strategy is to introduce innovative products and reduce cost structure. Hoover has launched nine of the 15 new products expected this year. We should be better positioned at the high end of the floor care pricing spectrum with new products scheduled for early 2005," Hake said.

Six-Month Performance

Maytag's sales in the first six months of 2004 amounted to $2.37 billion, up 3.1 percent from sales of $2.30 billion in the first six months of 2003. Operating income was $30.2 million, down 74.8 percent from $119.6 million in the year-earlier period.

Reported net loss for the first six months of 2004 was $2.4 million, or 3 cents per share. In the first six months of 2003, Maytag's reported net income was $59.7 million, or 76 cents per share. The earnings (loss) per share for the first six months of 2004 and 2003 included the following items:

Full-Year Expectations

Free cash flow (cash flow from operations less capital expenditures) is expected to be $125 to $150 million for the year. In addition, the company made a $20 million contribution to the pension plan in the second quarter, completing the $90 million in voluntary contributions planned for the year.

Commenting on earnings expectations for the full year 2004, Hake said that additional increases in steel costs beginning in July and actions to reduce inventory levels will negatively impact second half results.

These items will be partially offset by savings from the company's restructuring activities and by lower pension and postretirement medical costs associated with the Newton contract. The restructuring benefits will have more impact in the fourth quarter than in the third.

As a result, the company now expects full-year reported earnings per share in the range of 20 to 30 cents. The 2004 full-year guidance includes restructuring charges of approximately 80 cents per share.