Press Releases
Tecumseh Products Company Reports Third Quarter 2001 Net of $1.02 Per Share Before Nonrecurring Charges and Tax Credits
PRNewswire
TECUMSEH, Mich.
Oct 23, 2001
Tecumseh Products Company (NASDAQ: TECUA)(NASDAQ: TECUB) announced today its 2001 third quarter consolidated results as summarized in the following Consolidated Condensed Statements of Income.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in millions except Three Months Ended Nine Months Ended
per share amounts) September 30, September 30,
2001 2000 2001 2000
Net Sales $313.1 $348.8 $1,099.8 $1,291.4
Cost of sales and operating expenses 263.4 305.6 943.2 1,098.7
Selling and administrative expenses 28.0 27.1 89.6 90.6
Nonrecurring items 29.3 --- 29.3 33.5
Operating Income (Loss) (7.6) 16.1 37.7 68.6
Interest expense (0.9) (1.6) (3.4) (4.5)
Interest income and other, net 7.4 6.8 16.6 19.8
Income (Loss) Before Taxes (1.1) 21.3 50.9 83.9
Taxes On Income (6.3) 7.5 14.2 32.6
Net Income $5.2 $13.8 $36.7 $51.3
Basic and Diluted Earnings Per Share $0.28 $0.73 $1.97 $2.65
Weighted Average Shares (in thousands
of shares) 18,545 19,052 18,650 19,330
Third quarter earnings before nonrecurring charges and tax credits amounted to $18.9 million, or $1.02 per share. Reported net income for the third quarter of 2001 amounted to $5.2 million or $0.28 per share compared with net income of $13.8 million or $0.73 per share in the third quarter of 2000. Included in reported results for the third quarter of 2001 are nonrecurring charges of $29.3 million ($18.9 million net of tax, or $1.02 per share) representing the cost of the Company's previously announced early retirement incentive program and a $5.2 million ($0.28 per share) tax credit resulting from a refund of prior years' federal income taxes. Net income before these nonrecurring items amounted to $50.4 million or $2.70 per share for the first nine months of 2001 compared to net income before nonrecurring items of $74.6 million or $3.86 per share in the same period of 2000. Nonrecurring charges of $23.3 million, net of tax, had the effect of reducing reported earnings for the first nine months of 2000 to $51.3 million or $2.65 per share. Consolidated sales for the third quarter of 2001 amounted to $313.1 million, compared to sales of $348.8 million in the third quarter of 2000. Sales for the nine months ended September 30, 2001 were $1,099.8 million compared to sales of $1,291.4 million in the first nine months of 2000.
These results were due primarily to lower sales and profits in the Company's two major business segments, Compressor Products and Engine & Power Train Products.
Compressor Business
Third quarter 2001 sales in the Company's Compressor Business declined to $175.5 million from $207.0 million in the third quarter of 2000. Sales in the nine months ended September 30, 2001 amounted to $647.9 million compared to $720.2 million in the first nine months of 2000. These declines were attributable to lower demand in most major markets served by the Company's products when compared to 2000 results. Sales of air conditioning compressors experienced decreases from 2000 levels. The room air market continues to be hard hit by the impact of, not only continued price competition from Asian producers, but the shifting of production of finished room air conditioning units from the United States to Asia by domestic manufacturers. Export sales, particularly to Asian customers, have declined significantly year over year.
Compressor Business operating profit for the third quarter of 2001 amounted to $15.2 million compared to $9.6 million in the third quarter of 2000. Year-to-date operating income for the nine months ended September 30, 2001 and 2000 amounted to $52.0 and $58.3 million, respectively. Operating margins in the Company's domestic compressor operations have been adversely impacted by a number of factors including lower overall selling prices, reduced fixed cost coverage as a result of lower production volumes and manufacturing inefficiencies.
The Company's Brazilian operations continue to be the bright spot in worldwide compressor operations contributing over 95% of the Compressor Business' operating profit in the third quarter 2001, and approximately 68% of the Business' operating profits for the nine months ended September 30, 2001. Brazilian operating margins have benefited from the favorable effects of the weak Brazilian currency when compared to the U.S. dollar. Indian compressor operations generated a small operating loss during the quarter as a result of reduced demand.
Engine & Power Train Business
Sales in the third quarter of 2001 declined to $111.4 million from $116.6 million in the third quarter of 2000. Engine & Power Train sales in the nine months ended September 30, 2001 amounted to $357.7 million compared to $475.3 million in the first nine months of 2000. Operating income for the three months ended September 30, 2001 amounted to $5.5 million compared to $5.9 million in the third quarter of 2000. For the nine months ended September 30, 2001, operating income was $9.9 million compared to $37.6 million in the first nine months of 2000. Both sales and profits in the Engine & Power Train Business segment for the three and nine month periods ended September 30, 2001 have been adversely impacted by significant reductions in engine demand for lawn and garden applications, as well as various other utility applications, such as portable power generators, edgers, tillers, etc., and lower than anticipated sales of lawn and garden engines and transmissions, partially offset by higher than initially expected snow thrower demand. Unit production costs continue to be adversely impacted by these reduced production and shipping levels.
Pump Business
Sales in the third quarter of 2001 increased slightly to $26.2 million from $25.2 million in the third quarter of 2000. Pump Business sales in the nine month period ended September 30, 2001 decreased to $94.2 million compared to $95.9 million in 2000. Operating profit in the third quarter of 2001 and 2000 respectively amounted to $2.7 million and $2.3 million. Year-to-date operating profit amounted to $10.7 million in 2001 compared to $12.2 million in 2000.
Nonrecurring Charge
During the third quarter of 2001, the Company offered an early retirement incentive plan to eligible Corporate, North American Compressor Group and Engine & Power Train Products Group employees. 250 employees, representing approximately 78% of those eligible, or approximately 20% of the total salaried workforce in the eligible groups, elected early retirement. The cost of providing the pension and healthcare benefits associated with this plan amounted to $29.3 million pretax ($18.9 million net of tax) and has been recorded as a nonrecurring charge in the third quarter. Ongoing cost savings from this action are estimated to be in a range of $10 to $12 million annually.
Share Repurchase
As part of a previously announced share repurchase program, the Company purchased 67,100 shares of its Class B common stock and no shares of its Class A common stock during the third quarter of 2001. Existing authority covers the purchase of an additional 1.1 million shares through the end of June, 2002.
Outlook
Conditions in the Company's major business segments are not expected to improve for the balance of the year. Competitive pricing pressures and worldwide excess production capacity will continue to impact the compressor business. Brazilian sales are expected to remain relatively strong during the fourth quarter, but risks exist relative to the Brazilian energy crisis, a weakening domestic economy and the currency situation. While the Company anticipates that the reasonably robust market for its snow thrower engines will continue into the fourth quarter, demand for other Engine & Power Train products is expected to remain weak. A soft economy and uncertain consumer spending, due in part to the events of September 11th, will likely have an adverse impact on demand for all of the Company's products. As a result, 2001 consolidated fourth quarter earnings before special charges are expected to be below the earnings level reported for the fourth quarter of 2000.
In addition to the early retirement incentive action reported above, it is probable that the Company will undertake further restructuring and/or realignment actions in the fourth quarter. These actions will be designed to address capacity issues, as well as to improve overall cost structure and competitive position, and will likely result in a significant reorganization of the Company's Engine & Power Train Group which may include the closing of one or more manufacturing or assembly plants. While the cost of these actions is not yet known, they will no doubt have a significant impact on fourth quarter results. Additional capacity rationalization and cost structure initiatives are under consideration in both the Compressor and Engine & Power Train businesses and, as these plans are finalized, future results will likely be impacted by one or more nonrecurring charges. While the amount and timing of these charges cannot currently be accurately predicted, they may affect several quarterly periods or years, and they could be material to the reported results in the particular quarter or year in which they are recorded.
RESULTS BY BUSINESS SEGMENTS (UNAUDITED)
Three Months Ended Nine Months
Ended
(Dollars in millions) September 30, September 30,
2001 2000 2001 2000
Net Sales:
Compressor Products $175.5 $207.0 $647.9 $720.2
Engine & Power Train Products 111.4 116.6 357.7 475.3
Pump Products 26.2 25.2 94.2 95.9
Total Net Sales $313.1 $348.8 $1,099.8 $1,291.4
Operating Income:
Compressor Products $15.2 $ 9.6 $52.0 $58.3
Engine & Power Train Products 5.5 5.9 9.9 37.6
Pump Products 2.7 2.3 10.7 12.2
Corporate expenses (1.7) (1.7) (5.6) (6.0)
Nonrecurring items (29.3) --- (29.3) (33.5)
Total Operating Income (Loss) (7.6) 16.1 37.7 68.6
Interest expense (0.9) (1.6) (3.4) (4.5)
Interest income and other, net 7.4 6.8 16.6 19.8
Income (Loss) Before Taxes $(1.1) $21.3 $50.9 $83.9
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
(Dollars in millions) 2001 2000
Assets
Current Assets:
Cash and cash equivalents $264.9 $268.2
Accounts receivable, net 227.5 265.6
Inventories 260.9 274.9
Deferred income taxes and other 84.6 74.0
Total Current Assets 837.9 882.7
Property, Plant and Equipment - Net 430.2 444.7
Other Assets 246.7 225.7
Total Assets $1,514.8 $1,553.1
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $105.0 $123.5
Short-term borrowings 7.4 6.3
Accrued liabilities 150.1 150.5
Total Current Liabilities 262.5 280.3
Product Warranty and Self-Insured Risks 22.3 24.5
Long-term Debt 13.8 14.2
Pension and Postretirement Benefits 218.3 205.4
Accrual for Environmental Matters 32.5 33.3
Total Liabilities 594.4 557.7
Stockholders' Equity 965.4 995.4
Total Liabilities and Stockholders' Equity $1,514.8 $1,553.1
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended Nine Months Ended
(Dollars in millions) September 30, September 30,
2001 2000 2001 2000
Total Stockholders' Equity
Beginning Balance $977.4 $1,003.7 $995.4 $1,014.2
Comprehensive Income:
Net Income 5.2 13.8 36.7 51.3
Other Comprehensive Income (8.5) (11.2) (30.8) (19.3)
Total Comprehensive Income (3.3) 2.6 5.9 32.0
Cash Dividends Declared (6.0) (6.1) (17.9) (18.5)
Stock Repurchases (2.7) (10.6) (18.0) (38.1)
Total Stockholders' Equity
Ending Balance $965.4 $989.6 $965.4 $989.6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
(Dollars in millions) September 30,
2001 2000
Cash Flows From Operating Activities:
Net income $36.7 $51.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 55.2 55.0
Nonrecurring items 29.3 33.5
Accounts receivable 30.1 8.0
Inventories 6.0 (21.0)
Payables and accrued expenses (20.7) 24.0
Prepaid pension expense (21.6) (18.8)
Other (7.7) (15.1)
Cash Provided By Operating Activities 107.3 116.9
Cash Flows From Investing Activities:
Business acquisition, net of cash acquired (15.5) ---
Capital expenditures (48.6) (45.7)
Cash Used in Investing Activities (64.1) (45.7)
Cash Flows From Financing Activities:
Dividends paid (17.9) (18.5)
Increase (decrease) in borrowings, net 0.7 (2.8)
Repurchases of common stock (18.0) (38.1)
Cash Used in Financing Activities (35.2) (59.4)
Effect of Exchange Rate Changes on Cash (11.3) (6.4)
Increase (Decrease) in Cash and Cash Equivalents (3.3) 5.4
Cash and Cash Equivalents:
Beginning of Period 268.2 270.5
End of Period $264.9 $275.9
Cautionary Statement Relating to Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the safe harbor provisions created by that Act. In addition, forward-looking statements may be made orally in the future by or on behalf of the Company. Forward-looking statements can be identified by the use of terms such as "expects," "should," "may," "believes," "anticipates," "will," and other future tense and forward-looking terminology.
Readers are cautioned that actual results may differ materially from those projected as a result of certain risks and uncertainties, including, but not limited to, i) changes in business conditions and the economy in general in both foreign and domestic markets and the effect of terrorist activity and armed conflict; ii) weather conditions affecting demand for air conditioners, lawn and garden products and snow throwers; iii) the extent to which the decline in demand for lawn and garden and utility engines will continue, and the success of the Company's ongoing effort to bring costs in line with projected production levels and product mix; iv) financial market changes, including fluctuations in interest rates and foreign currency exchange rates; v) economic trend factors such as housing starts; vi) emerging governmental regulations; vii) availability of materials; viii) actions of competitors; ix) the ultimate cost of resolving environmental matters; x) the extent of any business disruption resulting from the conversion to the Euro; xi) the Company's ability to profitably develop, manufacture and sell both new and existing products; xii) the extent of any business disruption that may result from the restructuring and realignment of the Company's manufacturing operations, the ultimate cost of those initiatives and the amount of savings actually realized; xii) the extent of savings actually realized from the Company's early retirement program; and xiv) potential political and economic adversities that could adversely affect anticipated sales and production in Brazil. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward- looking statements, whether as a result of new information, future events or otherwise.
Tecumseh Products Company will host a conference call to report on the third quarter results on Tuesday, October 23 at 11 a.m. ET. The call will be broadcast live over the Internet and then available for replay through Tecumseh Products Company's website at http://www.tecumseh.com/ .
Press releases and other investor information can be accessed via Tecumseh Products Company's Internet web site at http://www.tecumseh.com/ . Recent quarterly earnings information and press releases can be obtained at no charge by accessing PR Newswire's Internet web site at http://www.prnewswire.com/ .
SOURCE: Tecumseh Products Company
Contact: Pat Walsh of Tecumseh Products Company, +1-517-423-8455
Website: http://www.tecumseh.com/
Company News On-Call: http://www.prnewswire.com/comp/842875.html