Maytag Corporation

founded: 1893

Contact Information:

headquarters: 403 west fourth street
newton, ia 50208-0039 phone: (641)792-7000 fax: (641)787-8376 url: http://www.maytag.com

OVERVIEW

Maytag Corporation, in business since 1893, is the third largest manufacturer of major household appliances in the United States, trailing Whirlpool Corporation and GE Appliances. Originally founded as a manufacturer of farm implements, the company today concentrates on the production of clothes washers and dryers, dishwashers, electric ranges and ovens, and refrigerators. Its full line of home appliances is marketed under the brand names of Admiral, Amana, Dynasty, Jenn-Air, Magic Chef, and Maytag. Through its Hoover subsidiary, the company is the market leader in floor care products.

In addition to its full range of household appliances, Maytag manufactures a wide range of products for commercial applications, including cooking, floor care, laundry, and vending. Maytag sells specially modified washers and dryers for use in coin laundries, restaurants, hotels, health care facilities, athletic clubs, apartment buildings, and colleges and universities. Its Hoover subsidiary produces a number of floor care products designed for use in office buildings, hotels, restaurants, and schools.

One of Maytag's subsidiaries, Dixie-Narco, is a major U.S. manufacturer of soft drink bottle and can vending machines. The vending machines are primarily sold by Dixie-Narco to soft drink bottlers, including Coca-Cola and Pepsico. Another Maytag subsidiary, Jade Range, manufactures premium-priced commercial ranges and refrigerators, as well as commercial-style ranges for the home market.

COMPANY FINANCES

Maytag executives voiced some disappointment with the company's financial performance in 2001. Although revenue climbed to $4.3 billion in 2001, the company's profit fell sharply to $47.7 million, or $1.41 per share, from $201 million, or $2.44 per share, in 2000, when revenue totaled $4.2 billion. Reasons for the decline in net income included higher marketing, distribution, and support costs; coupled with low price points in the household appliance market. Other factors contributing to the drop in profit included lower volume in the floor care business and reduced revenue in the company's vending machine business. In the 52 weeks ended May 24, 2002, Maytag's stock traded between a low of $22.25 and a high of $47.94. The company's price earnings ratio, as of May 24, 2002, was 24.83. During 2001, Maytag took a number of special charges against income, including a restructuring connected with the company's reduction in its salaried workforce and the discontinuation of some of its operations. In 2000, Maytag posted net income of $201 million, or $2.44 a share, on sales of $4.2 billion, down from a 1999 profit of almost $329 million, or $3.66 per share, on revenue of $4.3 billion.

After the first quarter of 2002, things were looking up for Maytag, although company executives were quick to point out that they didn't expect the first quarter buoyancy in their key markets to be sustained throughout the year. In the first quarter of 2002, the company's earnings per share jumped to 75 cents per share, compared with 46 cents a share in the first quarter of 2001. Net income for the first quarter in 2002 totaled $56.7 million, compared with $36.6 million a year earlier. When interviewed by Bill Griffeth on cable television's CNBC business network, Ralph Hake, Maytag's chairman and chief executive officer, attempted to temper optimism for the remainder of 2002, based on the company's performance in the first quarter by offering his analysis. "The first quarter in our industry was up 9.5 percent, really quite a surprise to everyone. Next quarter it will be up about 5 and for the year it will be up 2 or 3. So the environment is going to mitigate performance here going forward."

ANALYSTS' OPINIONS

After the announcement of Maytag's earnings for the first quarter of 2002, Lawrence Horan, research director at Parker/Hunter Inc., said it appeared that the company might be cutting prices. "Gross margin was considerably below a year ago, so I suspect that they are pumping the volume to get the units out. Under their interim CEO [Leonard A. Hadley, who served as president and CEO from November 2000 until June 2001] last year, they were vehement about holding the minimum suggested retail price. Maybe they are looking the other way to move the stuff." As of mid-April 2002, analysts' full-year estimates of Maytag earnings per share ranged from $2.45 to $2.60, with a mean of $2.52, according to First Call.

Reacting to a February 2002 prediction from Maytag Chairman Ralph Hake that the company's 2002 earnings would increase 20 percent on a sales increase of 12 to 15 percent, analyst Nicholas P. Heymann of Prudential Securities sounded a cautiously optimistic note. "They're moving along, getting work done. They're getting more products, trying to upmix. They're doing all the right stuff."

HISTORY

Founded in 1893 by Frederick Louis Maytag and three partners, Maytag Company was originally a manufacturer of farm implements, specializing at first in the production of threshing machine band cutters and self-feeder attachments. Before long the company added other farm equipment to its product line, some of it of questionable quality. Rampant customer complaints about the company's Success corn husker caused a rift between Maytag and his partners. He bought them out in 1907 and vowed that from that point on, Maytag products would be known for their quality and dependability.

In 1907 Frederick Maytag added a clothes washer to his company's product line, mostly to provide some sort of balance for the company during its off-season when farming equipment sold slowly. Maytag's washer quickly caught on with consumers, and by 1922 its revolutionary Gyrofoam washer, which had an agitator at its bottom rather than at the top, pushed Maytag into first place among U.S. washing machine companies. So successful had Maytag's washing machine business become that in the early 1920s its farm equipment business was discontinued. In 1925 the company was incorporated, and its stock was listed on the New York Stock Exchange. A year later the presidency of the company passed from L.B. Maytag, son of the founder, to another of his sons, E.H. Maytag, who remained in the presidency until his death in 1940.

Under the direction of E.H. Maytag, the company managed to weather the Great Depression fairly well, even managing to eke out a profit while scores of other companies went under. After the death of E.H. Maytag in 1940, the leadership of the company passed to his son, Fred Maytag II. During the years of World War II, Maytag produced nothing but parts for military equipment. The production of washers resumed in 1946, and the company began marketing a line of refrigerators and cooking ranges that were manufactured by other companies under the Maytag brand name. During the 1950s, a decade of rapid growth for the home appliance industry, Maytag began manufacturing equipment for the commercial self-service laundry businesses as well as institutional laundry operators. The 1950s also saw increased competition from full-line appliance companies, including General Electric, Frigidaire, and Whirlpool. Despite the increased competition, Maytag continued to manufacture only clothes washers and dryers, which were marketed alongside ranges and refrigerators manufactured by other companies. During this period the Maytag line of laundry equipment acquired a reputation as a premium brand.

FAST FACTS: About Maytag Corporation

Ownership: Maytag is a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: MYG

Officers: Ralph F. Hake, Chmn. and CEO, 53, 2001 base salary $409,821; Steven H. Wood, EVP and CFO, 44, 2001 base salary $260,000; William L. Beer, Pres. Maytag Appliances Division, 49, 2001 base salary $275,000

Employees: 21,755

Principal Subsidiary Companies: Maytag owns a number of subsidiaries in North America, the majority of which are based in the United States. One of its best-known subsidiaries is Hoover Company, the designer and manufacturer of floor care products for both home and commercial applications based in North Canton, Ohio. Other subsidiaries include Maytag Appliances, Newton Laundry Products, Herrin Laundry Products, Jackson Dishwashing Products, Galesburg Refrigeration Products, Cleveland Cooking Products, Jefferson City Component Parts, Amana Refrigeration Products, Florence Cooking Products, Searcy Laundry Products, and Jade Products Company. Subsidiaries based in Canada and Mexico include Maytag Canada, Hoover Canada, and Maytag Mexico Appliance Products.

Chief Competitors: As the third largest manufacturer of home appliances in the United States, Maytag faces its primary competition from Whirlpool Corporation, which is the number one U.S. appliance manufacturer; GE Appliances, number two in the United States; and Sweden's Electrolux AB, the world's largest manufacturer of household appliances.

In 1955 Maytag dropped cooking ranges from its product line and five years later it dropped refrigerators, returning to its core products of washing machines and dryers. After the death in 1962 of Fred Maytag, the direction of the company passed into the hands of non-family members. George Umbreit was named chairman and chief executive officer, while E.G. Higdon was appointed president. After laundry equipment sales peaked in the early 1970s, the company began pricing its washers and dryers more competitively, but beginning in 1980, under the direction of Chairman Daniel J. Krumm, Maytag started its return to the marketing of a full line of household appliances. To accomplish this transformation and maintain the corporate reputation for quality and dependability, Maytag began to acquire a number of appliance manufacturers that had also established a reputation for quality products. Acquired in 1981 was Hard-wick Stove Company, followed in 1982 by the Jenn-Air Corporation, a leading manufacturer of indoor electric grills with stove-top ventilation systems. In 1986 Maytag took over Magic Chef, giving the company a means to re-enter the refrigerator and freezer market through Magic Chef's Admiral division. Other Magic Chef brand names included Toastmaster, Norge, and Magic Chef. At about the same time, Maytag moved into the soft drink vending industry in a big way with the purchase of Dixie-Narco Inc., the biggest player in the U.S. soft drink vending market.

In 1989 Maytag moved into the floor care equipment market in a big way with the purchase of Chicago Pacific Corporation, primarily to acquire Chicago Pacific's Hoover division. The company's almost frenzied acquisition pace during the 1980s eventually caused acute financial problems, forcing the company, now under the direction of Chairman and CEO Leonard Hadley, to back away from most of its overseas operations and focus on putting its North American house in order.

Maytag's retrenchment in the early 1990s paid off in the latter half of the decade. In 1996 the company posted a healthy profit of $162 million, its best showing up to that point in the 1990. The following year, Maytag acquired G.S. Blodgett Corporation, manufacturer of commercial ovens, fryers, and charbroilers for the food service industry. In 2001 Blodgett was sold by Maytag to Middleby Corporation, and the company acquired the Amana major appliance and commercial microwave oven businesses from Goodman Manufacturing.

STRATEGY

Maytag looks to the future with optimism, hoping to ensure business success "by building on our traditions, continuously improving those, and seeking even greater opportunities for our innovation and operational excellence strategies," according to the company's 2001 Annual Report. For Maytag, innovation is not limited to the development of new products but also about finding new and creative ways to manage its business operations. Examples of this type of innovation in Maytag's management of its business include LeanSigma, a program that pinpoints ways to eliminate waste in operations and variations in parts and processes that can undermine product quality.

Maytag also hopes to extend its dominance in the laundry and floor care businesses into the kitchen sector. A major step toward this ambitious goal came in 2001 with the acquisition of Amana, part of Maytag's initiative to "own the kitchen." A strong result for the company's major appliance business in 2001 was expected to be followed in 2002 by still further growth. To support its initiative to "own the kitchen," Maytag plans an expanded advertising and marketing effort "designed to build presence and identity with customers."

Another important element in Maytag's strategy is its effort to develop world-class logistics. To that end, the company contracted with Exel Direct in late 2001 to handle the distribution of Maytag's major appliances to retail and builder customers. Exel Direct is also providing direct home delivery and installation of Maytag appliances to customers who desire that service. In its 2001 Annual Report, the company observed, "Teaming up with Exel has improved the quality of our service to customers and consumers, and we are experiencing cost benefits associated with having a single third party perform this part of our logistics function."

CHRONOLOGY: Key Dates for Maytag Corporation

1893:

Maytag Co. founded as farm implement manufacturer

1907:

Maytag markets its first washing machine

1921:

Maytag begins selling its products nationwide

1941:

Maytag suspends washer production to make parts for military aircraft

1948:

Maytag introduces automatic washers

1981:

Purchase of Hardwick Stove Co. sets off Maytag acquisition frenzy

1982:

Maytag acquires Jenn-Air

1986:

Maytag acquires Magic Chef group of companies

1989:

Maytag acquires Hoover Co.

2001:

Maytag acquires Amana

INFLUENCES

For much of its history, Maytag has adjusted its corporate strategy to reflect changing trends in the marketplace as well as outside forces exerting an influence on retail sales in the company's markets or retail markets in general. In its earliest years, Maytag Company, originally founded to manufacture farm implements, added the production of clothes washers to help balance the company's year-round business and offset the sharp drop in demand for farming equipment during the off-season. By 1920 Maytag's success in the laundry market prompted a decision to abandon the farm equipment market altogether.

As the household appliance industry grew rapidly during the 1950s and competition became keener, particularly from full-line appliance manufacturers, Maytag expanded its product line to include cooking ranges and refrigerators produced by other companies but marketed under the Maytag brand name. Within a few years, however, the company decided to return to its core product line of clothes washers and dryers, although it soon added to those a portable dishwasher and food-waste disposable systems manufactured in its own plants.

After sales in the laundry equipment market peaked in the 1970s, the company once again began to move towards marketing a full line of household appliances. To accomplish this, Maytag embarked on an ambitious campaign of acquisition, looking specifically for manufacturers of appliances that, like Maytag, had earned a reputation for producing dependable, high-quality products. During the 1980s, Maytag acquired Hardwick Stove Company, Jenn-Air Corporation, and Magic Chef. Also acquired during this period was vending machine manufacturer Dixie-Narco Inc., giving Maytag a leading position in the soft drink vending equipment market. In 1989 the company purchase Chicago Pacific Corporation, mostly to gain entry into the floor-care industry, in which Chicago Pacific's Hoover Division was a major player.

By the early 1990s Maytag's frenetic acquisition pace led to hard times for the company during the economic recession of that period. Maytag trimmed back its overseas operations sharply, choosing to focus instead on its North American markets. More recently, however, the company has begun to add to its product line through selective acquisitions and to expand its operations abroad. In 2001 Maytag acquired Amana's major appliance business from Goodman Manufacturing, although only after selling its G.E. Blodgett commercial cooking equipment manufacturer to Middleby Corporation.

CURRENT TRENDS

Perhaps the most significant trend for Maytag in recent years has been its carefully studied transformation from its core business of clothes washers and dryers into a full-line household appliance manufacturing. The company has made clear its intention to continue this transformation in 2002, stating in a recent corporate release: "Now we need to move into the kitchen to own it the way we own the laundry room and floor care. To the extent we can develop elegant, innovative kitchen products, we can own the most active and involved room in the household-the kitchen." The information explosion that has accompanied the rapid spread in popularity of the Internet has resulted in changes in Maytag's marketing strategy. In his letter to shareholders in the company's 2001 Annual Report, Chairman Ralph Hake commented: "We will continue to build our relationship with consumers in other ways, particularly with the Internet where close to 30 percent of all appliance shoppers-nearly 11 million consumers-research products before going to a retail outlet to make their purchase. The influence of the Internet as a valuable resource will grow exponentially over the years, and Maytag will be there to help educate and influence shoppers online."

PRODUCTS

Today, in addition to its core laundry equipment business, Maytag markets a broad range of major household appliances. These products include cooking ranges and ovens, microwaves, dishwashers, and refrigerators, as well as numerous specially designed products for commercial applications. These products are marketed under the following brand names: Maytag, Amana, JennAir, Dynasty, Magic Chef, and Jade Range. A wide range of floor care products are produced and sold by Maytag's Hoover subsidiary, and its Dixie-Narco subsidiary is a leader in the production and sale of vending equipment.

CORPORATE CITIZENSHIP

Maytag takes seriously its responsibilities to the communities in which it operates. The three main areas of Maytag's social commitment are community involvement, its contributions program, and environmental efforts. In the realm of community involvement, Maytag endeavors to give back to the community through company-sponsored programs and the efforts of Maytag employees who volunteer for community service. In Canton, Ohio, more than 300 Hoover Company employees built a Habitat for Humanity home. A similar project for Habitat for Humanity was undertaken by employees at Maytag's plant in Cleveland, Tennessee.

Through its contributions program, Maytag has sought to finance programs and projects that make a difference in people's lives. The company in 2000 contributed more than $4 million in cash and products through its foundation and direct giving program to meet some of the needs and support worthy causes in Maytag's operating communities. Of this sum, approximately 43 percent supported education, while 35 percent was dedicated to community improvement, largely through youth programs and arts and culture. Most of the remainder was committed to community support, including the United Way.

In the area of environmental responsibility, Maytag has taken the lead within the appliance industry in pushing for stronger energy and water standards. The company has worked closely with the Department of Energy to develop new Energy Star criteria for appliances. Maytag has twice been named Energy Star Appliance Partner of the Year by the Department of Energy and the Environmental Protection Agency.

GLOBAL PRESENCE

Responsible for the coordination of Maytag's presence in foreign markets is Maytag International, headquartered in Chicago. Maytag International directs all the corporation's international efforts, including export sales and marketing and the licensing of brands and joint ventures. Maytag's presence in overseas markets includes direct sales operations in Mexico, the United Kingdom, Australia, and Puerto Rico.

LEANSIGMA HELPS TRIM WASTE

In its quest to keep down the costs of manufacturing operations while maintaining high quality and finding new efficiencies, Maytag has turned to LeanSigma. This program helps identify waste in operations, as well as variations in parts and processes that can undermine product quality. A shining example of LeanSigma's benefits can be found at Maytag's plant in Jackson, Tennessee. The program resulted in the transformation of a half-mile-long, continuous-line dishwasher assembly line operation into seven separate assembly cells capable of a wide range of product-mix capabilities. This transformation improved productivity at Jackson by 22 percent and freed up 43,000 square feet of manufacturing floor space. Perhaps most importantly, the changes resulted in an improvement in product quality of 55 percent. To achieve similar efficiencies elsewhere, Maytag is implementing LeanSigma at all its major manufacturing facilities.

EMPLOYMENT

According to its 2001 annual report, Maytag Corporation employed a workforce of 21,755 people, as of December 31, 2001. This represented an increase of about 18.5 percent from its workforce of 18,350 at the end of 2000 and is explained largely by the company's acquisition of Amana during 2001, which added roughly 4,000 employees to the corporate payroll.

Maytag's Web site carries this profile of the type of employee the company is looking for: "At Maytag, we reach out for the best people. . .people with a need to succeed, people who make things happen, people committed to quality, people who understand innovation."

SOURCES OF INFORMATION

Bibliography

"business description: maytag corporation." multex investor, 2002. available at http://www.marketguide.com.

cohen, rachel. "maytag earnings to top estimates; shares surge." reuters business report, 12 march 2002.

——. "maytag net income falls; sees slower sales growth." reuters business report, 16 april 2002.

griffeth, bill. "maytag-chmn. & ceo-interview." cnbc/dow jones business video, 16 april 2002.

"maytag corp.—history." gale business resources, 2002. available at http://galenet.galegroup.com/servlet/gbr

"maytag corporation." hoover's online, 2002. available at http://www.hoovers.com.

maytag corporation 2001 annual report. newton, ia: maytag corporation, 2002.

maytag corporation home page, 2002. available at http://www.maytag.com.

For an annual report:

on the internet at: http://www.maytag.comor write: shareholder relations, maytag corporation, 403 w. 4th st. n., newton, ia 50208

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. maytag corporation's primary sics are:

3581 automatic vending machines

3582 commercial laundry equipment

3589 service industry machinery nec

3631 household cooking equipment

3633 household laundry equipment

3635 household vacuum cleaners

3639 household appliances nec

also investigate companies by their north american industrial classification system codes, also known as naics codes. maytag corporation's primary naics codes are:

333311 automatic vending machine manufacturing

335212 household vacuum cleaner manufacturing

335221 household cooking appliance manufacturing

335224 household laundry equipment manufacturing