We must immediately take more aggressive steps to improve our cost position by reducing our manufacturing footprint
Ralph Hake, Maytag Chairman and CEO

Maytag Corporation today reported first quarter consolidated sales of $1.168 billion, down 4.2 percent from sales of $1.219 billion in the same period last year.

Shares of Maytag plummeted nearly 14% in pre-market trading today as the company reported consolidated net income for the first quarter was $7.7 million or 10 cents per share, compared with net income of $38.7 million, or 49 cents per share, a year earlier.

Savings from restructuring activities implemented in 2004 only partially offset rising costs. Lower net sales and higher costs -- primarily for steel and energy-related items, and higher distribution costs -- reduced first-quarter, year-over-year profitability.

Maytag Chairman and CEO Ralph Hake stated that while the company achieved the gains that were anticipated through the 'One Company' restructuring, it is clear that not enough progress has been made. "We must immediately take more aggressive steps to improve our cost position by reducing our manufacturing footprint," he said. "This will require a manufacturing restructuring that addresses our noncompetitive supply chain costs and burden absorption issues. A new financing plan will fund these business initiatives, which will include a new credit agreement and finalizing plans to refinance 2006 debt maturities."

In the Home Appliance segment, sales declined compared to the prior year primarily as a result of lower sales of OEM refrigeration products, lower sales at Best Buy as well as lower average selling prices for floor care products.

However, Hake noted that the company experienced sequential market share improvement in all major appliance categories, signaling that the actions Maytag has implemented to improve its sales performance are taking root. He said, "We expect further growth from new products scheduled for launch in the first half 2005, among them are the Maytag(R) Neptune(R) 27-inch washer and dryer, the Jenn-Air(R) suite of glass-front appliances, and the new Hoover(R) FloorMate(TM) hard floor cleaner."

Maytag Services and Maytag International continue to perform well, producing double-digit revenue growth this quarter versus prior year. Commercial Products remained down year over year given the ongoing weakness in the vending industry.

While sales were up slightly in Home Appliances compared with the fourth quarter, Hake noted that the Jenn-Air(R) premium appliance lines and the company's value brands posted strong gains in the quarter. The corporation saw an improvement in average selling prices this quarter based upon its recent pricing actions; however, these increases were largely offset by selected 2004 price repositioning and product mix.

As expected, floor care sales were down year over year due to pricing actions in 2004. However, floor care did see stabilization in market share in key categories with positive momentum attributed to the full-size extractor category. "We expect new floor care product launches to take hold with new premium products slated for the second half of the year," Hake said. "Going forward, our most innovative products this year focus on floor care and laundry, which we believe are significant opportunities."

Cash flow from operations in the first quarter of 2005 was a use of $49.8 million, compared with a use of $83.9 million in the first quarter of 2004. The improvement in cash flow was due to a smaller growth in working capital and lower pension contributions, partially offset by higher cash payments for restructuring charges and payment of $12.3 million for the final resolution of a distributor lawsuit.

Maytag's overall debt levels are down $126 million from the prior year, and cash and cash equivalents were increased by $91 million to $99 million. In addition, inventories were down from the prior year. In 2004, Maytag had higher inventories for its refrigeration transition and new product introductions.

Hake noted that the lower-than-expected realization from our pricing actions, as well as higher fuel and energy-related raw material costs have prompted the company to reduce guidance for 2005. Maytag now expects reported earnings per share for the full year 2005 in the range of 45 cents to 55 cents, including approximately 10 cents in restructuring charges. Earlier, the company noted that 2005 guidance for reported earnings per share were expected to be in the range of $1.10 to $1.30, including about 5 cents for restructuring charges.