Maytag Rtgs Affirmed by S&P After Acquisition Anncmnt.NEW YORK--(BUSINESS WIRE)--S&P CreditWire 8/26/97--Standard & Poor's today affirmed its triple-'B'-plus corporate credit and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings, and 'A-2' commercial paper rating on Maytag Corp. The affirmations follow the company's announcement of its intention to acquire the G.S. Blodgett Corp., a commercial cooking products manufacturer, for $93.5 million of cash, as well as the assumption of $49 million of debt. The rating outlook is positive. About $640 million of total debt was outstanding at June 30, 1997. This largely debt-financed acquisition will result in an almost 25% increase in Maytag's 1997 debt levels, yet Standard & Poor's estimates that credit measures, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma for this transaction, will remain close to 1996 levels. However, further improvement in credit measures will occur at a slower pace than previously anticipated. Ratings reflect a strong financial profile, and the company's well established market position in the U.S. white goods industry, offset by some vulnerability to U.S. economic cyclicality. While Maytag is one of the smaller players in the highly concentrated U.S. home appliance market, its premium brands have helped to sustain shares in a difficult and competitive environment. Maytag's nonconsumer-based businesses, Dixie Narco vending machines and commercial laundries, provide some diversity and may mitigate the company's exposure in a cyclical downturn. Following 5% adjusted revenue growth in 1996, Maytag's core revenue growth was sustained at about 4% for the first half of 1997, and the addition of the company's new joint venture in China boosted reported sales growth to 8%. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. is flat for the first half of 1997, adjusting for a 1996 restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and the joint venture, although expectations are for a resumption of historical operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in the second half of 1997. Adjusting for capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. expense (and operating leases), in 1996, pretax interest coverage has been steadily sustained at over 5.0 times (x) since fiscal 1995 and Standard & Poor's estimates that coverage will remain at these levels in the near term. Despite high levels of capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. and a 10.8 million share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program, debt only increased modestly during 1996 to over $600 million. Maytag's present capital spending program, which is expected to continue through fiscal 1997, should generate continued sales and profit growth. A top mount refrigerator line, a horizontal axis washing machine (storage) washing machine - An old-style 14-inch hard disk in a floor-standing cabinet. So called because of the size of the cabinet and the "top-loading" access to the media packs - and, of course, they were always set on "spin cycle". , redesigned vending equipment, and the new Hoover Wind-Tunnel vaccuum cleaner have been launched in fiscal 1997. Standard & Poor's expects further acquisitions, share repurchases, and reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. to be funded largely from internally generated cash flow. OUTLOOK: POSITIVE Maytag has sustained strong credit ratios, despite a weak year for its vending equipment segment in 1996 and flat industry growth. Sizable reinvestment programs, relative to internally generated cash flow, should generate additional earnings growth in the second half of fiscal 1997. Sustained improvement of credit measures through the company's expansion could result in an upgrade over the next couple of years. -- CreditWire CONTACT: Standard & Poor's Rating Services Nicole Delz Lynch, 212/208-1970 or Pamela E. Gelles, 212/208-1355 |
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