Press Releases
Tecumseh Products Company Reports Fourth Quarter 2000 Net of $0.79 Per Share
PRNewswire
TECUMSEH, Mich.
Jan 25, 2001
Tecumseh Products Company (NASDAQ: TECUA)(NASDAQ: TECUB) announced today its 2000 fourth quarter and full year 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 Twelve Months Ended
per share amounts) December 31, December 31,
2000 1999 2000 1999
Net Sales $358.5 $413.5 $1,649.9 $1,814.3
Cost of sales and
operating expenses 312.7 348.2 1,411.4 1,507.4
Selling and administrative
expenses 27.7 28.4 118.3 117.6
Nonrecurring items 0.0 (5.5) 33.5 (5.5)
Operating Income 18.1 42.4 86.7 194.8
Interest expense (2.2) (1.3) (6.7) (7.9)
Interest income and other, net 8.1 5.3 27.9 28.1
Nonrecurring gain 0.0 0.0 0.0 8.6
Income Before Taxes on Income 24.0 46.4 107.9 223.6
Taxes On Income 9.2 16.9 41.8 81.6
Net Income $14.8 $29.5 $66.1 $142.0
Basic and Diluted Earnings
Per Share $0.79 $1.48 $3.44 $7.00
Weighted Average Shares
(in thousands of shares) 18,884 19,912 19,218 20,277
Consolidated net income for the fourth quarter of 2000 amounted to $14.8 million, or $0.79 per share, compared to net income of $29.5 million, or $1.48 per share in the fourth quarter of 1999. Included in 1999's fourth quarter results are nonrecurring credits of $5.5 million ($3.4 million or $0.17 per share, net of taxes). Consolidated net sales in the fourth quarter of 2000 decreased to $358.5 million from $413.5 million in 1999.
Full year 2000 net income amounted to $66.1 million, or $3.44 per share, on sales of $1,649.9 million, compared to net income of $142.0 million, or $7.00 per share, on sales of $1,814.3 million in 1999. Nonrecurring charges related to restructuring actions and asset impairments in the Compressor Group had the effect of reducing 2000 earnings by $23.3 million, net of tax, or $1.21 per share. Nonrecurring gains increased full year 1999 earnings by $9.0 million, net of tax, or $0.44 per share.
The lower 2000 results reflect reduced sales and earnings in the Company's two major business segments, Engine & Power Train Products and Compressor Products.
Compressor Business
Fourth quarter 2000 sales in the Company's Compressor Business declined to $199.6 million from $212.1 million in the fourth quarter of 1999. Sales for the year ended December 31, 2000 amounted to $919.8 million compared to $967.0 million in 1999. Compressor Business sales in both the three and twelve month periods ended December 31, 2000 were adversely impacted by reduced demand, as well as accelerating competition in the air conditioning markets. Intense price competition, primarily from Asian producers, continued to negatively impact the room air conditioning market. Additionally, the continued weakness of foreign currencies, particularly the Euro, had a negative impact on sales.
Compressor Business operating income for the fourth quarter of 2000 amounted to $8.0 million compared to $12.1 million in the fourth quarter of 1999. Operating income for the years ended December 31, 2000 and 1999 amounted to $65.7 and $91.5 million, respectively. Operating margins were adversely impacted by a number of factors including reduced volume, lower overall selling prices, lower fixed cost coverage as a result of lower production volumes and inefficiencies resulting from the transfer of production from the Somerset plant to other production facilities.
The Company's Brazilian operations continue to be the bright spot in worldwide compressor operations. Although operating margins were slightly lower than in 1999, the Brazilian operations contributed substantially all of the Compressor Business' operating profit in the fourth quarter of 2000, and approximately 66% of the operating profit for the year ended December 31, 2000. Brazilian margins, particularly in the second half of the year, were negatively impacted by the competitive worldwide pricing situation, as well as upward pressure on manufacturing costs. Indian operating results for 2000 were adversely impacted by the effects of a lengthy work stoppage and start-up costs associated with bringing a new manufacturing plant on line.
Engine & Power Train Business
Engine & Power Train sales in the fourth quarter of 2000 declined to $137.5 million from $180.6 million in the fourth quarter of 1999. Sales in the year ended December 31, 2000 amounted to $612.8 million compared to $734.3 million in 1999. Operating income for the three months ended December 31, 2000 amounted to $9.0 million compared to $24.1 million in the fourth quarter of 1999. For the year ended December 31, 2000, operating income was $45.9 million compared to $93.1 million in 1999. Both sales and profits in the Engine & Power Train Business for the quarterly and annual periods ended December 31, 2000 reflected significant reductions in engine demand for various utility applications such as portable power generators, reduced snow thrower engine demand, and lower than anticipated sales of lawn and garden engines and transmissions. As a result, 2000 results were adversely impacted by a product mix heavily dependent on lower margin lawn and garden applications. Additionally, unit production costs increased as a result of reduced production and shipping levels. 1999 results were favorably impacted by robust demand for higher margin utility engines used in portable electrical generators. The unusually high demand for these products resulted primarily from concerns relating to Y2K uncertainties.
Pump Business
Sales in the fourth quarter of 2000 increased to $21.4 million from $20.8 million in the fourth quarter of 1999. Pump Business sales for the year ended December 31, 2000 increased to $117.3 million compared to $113.0 million in 1999. Operating income in the fourth quarter of 2000 amounted to $3.2 million, compared to $2.5 million in the same period of 1999. Full year operating income amounted to $17.5 million in 2000 compared to $14.1 million in 1999. Pump sales grew for the year as a result of growth in water gardening and increased industrial sales. Margins improved somewhat from 1999 levels reflecting improved volume and the favorable impact of increased industrial segment sales.
During the third quarter of 2000, the Pump Business entered the residential wastewater collection, transfer and disposal market by acquiring the assets of Interon Corporation. This market, while currently in its infancy, is expected to grow rapidly as it provides an economical alternative to conventional gravity wastewater disposal systems.
Nonrecurring Items
During the first quarter of 2000, the Company recorded $33.5 million in nonrecurring charges ($23.3 million, net of tax) related to the restructuring and realignment of its domestic and international compressor manufacturing operations. Included in these amounts were approximately $15.5 million ($11.8 million, net of tax) in severance pay and future benefit costs relating to the announced realignments and manpower reductions in the Company's North American and Indian manufacturing operations, $5.1 million ($3.3 million, net of tax) in plant closing and exit costs, and $12.9 million ($8.2 million, net of tax) in asset impairment charges for idled, unusable and/or underutilized equipment.
1999 net income included nonrecurring credits of $14.1 million ($9.0 million, or $.44 per share, net of tax). This amount was comprised of an $8.6 million foreign currency hedging gain, a $4.6 million employee benefits plan curtailment gain, a $4.0 million gain on settlement of insurance claims and a $3.1 million charge for plant closing and environmental expenses.
Share Repurchase
At its meeting on January 24, 2001, the Company's Board of Directors approved the repurchase of up to an additional 1,500,000 shares of its common stock. Under this approval, the Board has authorized the repurchase of both Class A (TECUA) and Class B (TECUB) common stock in any combination up to 1,500,000 shares. Purchases under the authorization are to be made from time to time in the open market through June 30, 2002.
During the fourth quarter of 2000, the Company purchased 39,400 shares of its Class A common stock at a cost of $1.6 million. For the year, 912,500 shares were repurchased at a cost of $39.6 million.
Outlook
Worldwide market conditions in the Company's Compressor and Engine Businesses are not expected to improve significantly in 2001. It is highly likely that first quarter 2001 earnings will be well below those of first quarter 2000 exclusive of nonrecurring charges.
In an effort to improve profitability, the Company intends to pursue a strategy of cost reduction through a number of actions, such as lean manufacturing and continuous improvement measures, designed to improve productivity, product quality and customer acceptance. Additionally, efforts are underway to redesign and expand product offerings to fill in gaps in product lines and/or capabilities. In connection with these and other initiatives, it is possible that additional restructuring and realignment actions may be taken. Therefore, it is likely that future results will be impacted by one or more nonrecurring charges as these plans are finalized. While the exact amount and timing of these potential charges cannot be accurately predicted, they may affect several periods or years, and 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 Twelve Months Ended
(Dollars in millions) December 31, December 31,
2000 1999 2000 1999
Net Sales:
Compressor Products $199.6 $212.1 $919.8 $967.0
Engine & Power Train Products 137.5 180.6 612.8 734.3
Pump Products 21.4 20.8 117.3 113.0
Total Net Sales $358.5 $413.5 $1,649.9 $1,814.3
Operating Income:
Compressor Products $8.0 $12.1 $65.7 $91.5
Engine & Power Train Products 9.0 24.1 45.9 93.1
Pump Products 3.2 2.5 17.5 14.1
Corporate expenses (2.1) (1.8) (8.9) (9.4)
Nonrecurring items 0.0 5.5 (33.5) 5.5
Total Operating Income 18.1 42.4 86.7 194.8
Interest expense (2.2) (1.3) (6.7) (7.9)
Interest income and other, net 8.1 5.3 27.9 28.1
Nonrecurring gain 0.0 0.0 0.0 8.6
Income Before Taxes on Income $24.0 $46.4 $107.9 $223.6
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
December 31, December 31,
(Dollars in millions) 2000 1999
Assets
Current Assets:
Cash and cash equivalents $268.2 $270.5
Accounts receivable, net 265.6 268.6
Inventories 274.9 266.3
Deferred income taxes and other 74.0 68.9
Total Current Assets 882.7 874.3
Property, Plant and Equipment - Net 444.7 477.4
Other Assets 225.7 201.6
Total Assets $1,553.1 $1,553.3
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $123.5 $120.0
Short-term borrowings 6.3 7.9
Accrued liabilities 150.5 127.8
Total Current Liabilities 280.3 255.7
Product Warranty and Self-Insured Risks 24.5 28.8
Long-term Debt 14.2 15.6
Pension and Postretirement Benefits 205.4 203.4
Accrual for Environmental Matters 33.3 35.6
Total Liabilities 557.7 539.1
Stockholders' Equity 995.4 1,014.2
Total Liabilities and
Stockholders' Equity $1,553.1 $1,553.3
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended Twelve Months Ended
(Dollars in millions) December 31, December 31,
2000 1999 2000 1999
Total Stockholders' Equity
Beginning Balance $989.6 $999.3 $1,014.2 $995.7
Comprehensive Income:
Net Income 14.8 29.5 66.1 142.0
Accumulated Other
Comprehensive Income (1.5) 3.1 (20.8) (41.1)
Total Comprehensive Income 13.3 32.6 45.3 100.9
Cash Dividends Declared (6.0) (6.4) (24.5) (24.7)
Stock Repurchases (1.5) (11.3) (39.6) (57.7)
Total Stockholders' Equity
Ending Balance $995.4 $1,014.2 $995.4 $1,014.2
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Twelve Months Ended
(Dollars in millions) December 31,
2000 1999
Cash Flows From Operating Activities:
Net income $66.1 $142.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 71.2 72.4
Nonrecurring items 33.5 0.0
Accounts receivable (5.8) (29.9)
Inventories (14.9) (5.3)
Payables and accrued expenses 20.2 10.0
Prepaid pension expense (25.3) (22.1)
Other (11.0) (3.8)
Cash Provided By Operating Activities 134.0 163.3
Cash Flows From Investing Activities:
Capital expenditures (64.0) (73.0)
Cash Used in Investing Activities (64.0) (73.0)
Cash Flows From Financing Activities:
Dividends paid (24.5) (24.7)
Decrease in borrowings, net (2.2) (2.8)
Repurchases of common stock (39.6) (57.7)
Cash Used in Financing Activities (66.3) (85.2)
Effect of Exchange Rate Changes on Cash (6.0) (12.3)
Increase in Cash and Cash Equivalents (2.3) (7.2)
Cash and Cash Equivalents:
Beginning of Period 270.5 277.7
End of Period $268.2 $270.5
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; 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 and the unfavorable product mix in that segment of the Company's business 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) 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; and xii) the success of the Company's cost reduction and other initiatives and the magnitude of any related charges; and xi) the Company's ability to profitably develop, manufacture and sell both new and existing products. 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 fourth quarter results on Thursday, January 25 at 11:00 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's Internet web site at http://www.tecumseh.com/. Recent quarterly earnings information and press releases can be obtained at no charge, via fax, by calling "Company News On Call" at 800-758-5804, ext. 842875, or by accessing PR Newswire's Internet web site at http://www.prnewswire.com/ .
SOURCE: Tecumseh Products Company
Contact: Pat Walsh of Tecumseh Products Company, 517-423-8455
Website: http://www.tecumseh.com/
Company News On-Call: http://www.prnewswire.com/comp/842875.html or fax,
800-758-5804, ext. 842875