Press Releases
Tecumseh Products Company Reports Fourth Quarter 2001 Net Income Before Nonrecurring Charges of $0.54 Per Share
PRNewswire-FirstCall
TECUMSEH, Mich.
Jan 22, 2002
Tecumseh Products Company (NASDAQ: TECUA)(NASDAQ: TECUB) announced today its 2001 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,
2001 2000 2001 2000
Net Sales $299.1 $358.5 $1,398.9 $1,649.9
Cost of sales and
operating expenses 264.0 312.7 1,207.2 1,411.4
Selling and administrative
expenses 22.5 27.7 112.1 118.3
Nonrecurring items 6.1 -- 35.4 33.5
Operating Income 6.5 18.1 44.2 86.7
Interest expense (0.7) (2.2) (4.1) (6.7)
Interest income and
other, net 3.7 8.1 20.3 27.9
Income Before Taxes on
Income 9.5 24.0 60.4 107.9
Taxes On Income 3.4 9.2 17.6 41.8
Net Income $6.1 $14.8 $42.8 $66.1
Basic and Diluted Earnings
Per Share $0.33 $0.79 $2.30 $3.44
Weighted Average Shares
(in thousands of
shares) 18,480 18,884 18,607 19,218
Consolidated net income for the fourth quarter of 2001 amounted to $6.1 million, or $0.33 per share, compared to net income of $14.8 million, or $0.79 per share in the fourth quarter of 2000. Included in 2001's fourth quarter results are nonrecurring charges of $6.1 million ($3.9 million or $0.21 per share net of taxes) relating to a relocation of certain component part and engine manufacturing capabilities from domestic plants to the Czech Republic facilities. Consolidated net sales in the fourth quarter of 2001 decreased to $299.1 million from $358.5 million in 2000.
Full year 2001 net income amounted to $42.8 million, or $2.30 per share, on sales of $1,398.9 million, compared to net income of $66.1 million, or $3.44 share, on sales of $1,649.9 million in 2000. Nonrecurring charges related to the cost of an early retirement incentive program and to the Engine & Power Train Group charges referred to above had the effect of reducing 2001 earnings by $22.8 million net of tax, or $1.23 per share.
The lower 2001 results reflected continued weakness in sales and earnings in the Company's two major business segments, Compressor Products and Engine & Power Train Products.
Compressor Business
Fourth quarter 2001 sales in the Company's Compressor Business declined to $156.7 million from $199.6 million in the fourth quarter of 2000. Sales for the year ended December 31, 2001 amounted to $804.6 million compared to $919.8 million in 2000. Worldwide Compressor Business sales in both the three and twelve month periods ended December 31, 2001 were adversely impacted by reduced demand, as well as intense competition in the air conditioning markets. Price competition, and the near total shift in room air conditioner production to Asia, continued to negatively impact the room air conditioning market. Export sales from the United States, primarily to Asian markets, decreased by approximately $46.7 million in 2001 when compared to 2000.
Compressor Business operating income for the fourth quarter of 2001 amounted to $2.3 million compared to $8.2 million in the fourth quarter of 2000. Operating income for the years ended December 31, 2001 and 2000 amounted to $54.3 and $66.5 million, respectively. Operating margins were adversely impacted by a number of factors including reduced volume, lower overall selling prices, and lower fixed cost coverage as a result of lower production volumes. Brazilian sales declined from 2000 levels primarily as a result of a weak Brazilian currency, a soft local economy and reduced export sales.
The Company's Brazilian operations continued to be a significant component of the worldwide compressor operations. Operating margins in 2001 were consistent with 2000 margins. Brazilian operations contributed substantially all of the Compressor Business' operating profit in the fourth quarter of 2001, as well as the full year. European results remained weak due to a continuing softness in the European economy and reduced export sales. The Indian compressor operations significantly reduced their operating losses from 2000 levels when margins were adversely impacted by lengthy work stoppages and the start-up costs associated with a new manufacturing plant.
Engine & Power Train Business
Engine & Power Train sales in the fourth quarter of 2001 declined to $123.2 million from $137.5 million in the fourth quarter of 2000. Sales in the year ended December 31, 2001 amounted to $480.9 million compared to $612.8 million in 2000. Operating income for the three months ended December 31, 2001 amounted to $10.1 million compared to $9.2 million in the fourth quarter of 2000. For the year ended December 31, 2001, operating income was $20.0 million compared to $46.8 million in 2000. Fourth quarter 2001 results benefited from increased sales of engines for snow thrower applications. Both sales and profits in the Engine & Power Train Business for the quarterly and annual periods ended December 31, 2001 reflected significant reductions in engine demand for lawn and garden markets, as well as various utility applications, such as portable power generators. A relatively robust snow thrower market was not enough to offset the drop in demand for other applications. As a result, 2001 operating income was well below 2000 levels.
Pump Business
Pump Business sales in the fourth quarter of 2001 declined to $19.2 million from $21.4 million in the fourth quarter of 2000. Sales for the year ended December 31, 2001 decreased to $113.4 million compared to $117.3 million in 2000. Operating income in the fourth quarter of 2001 amounted to $0.9 million, compared to $2.5 million in the same period of 2000. Full year operating income amounted to $11.6 million in 2001 compared to $14.7 million in 2000. Decreased retail sales activity in the water gardening market resulting from a soft economy combined with slight decreases in sales for industrial and commercial applications were the primary reasons for the decline in sales and profits.
Nonrecurring Items
2001 annual results were adversely impacted by $35.4 million ($22.8 million net of tax, or $1.23 per share) in nonrecurring items. The fourth quarter charge of $6.1 million ($3.9 million net of tax, or $0.21 per share) in the Engine & Power Train business related primarily to the transfer of certain engine and component part production from domestic facilities to our facilities in the Czech Republic. The third quarter charge of $29.3 million ($18.9 million net of tax, or $1.02 per share) provided for the cost of an early retirement program which resulted in the reduction of 250 salaried employees.
Share Repurchase
In 2001, the Company's Board of Directors approved the repurchase of up to 1,500,000 shares of its common stock. The authorization permits 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 permitted to be made from time to time in the open market through June 30, 2002.
During the fourth quarter of 2001, the Company purchased 3,000 shares of its Class B common stock at a cost of $119,000. For the year, 8,500 shares of Class A shares were repurchased at a cost of $410,000 and 392,000 shares of Class B were repurchased at a cost of $17.6 million. Future purchases will be considered based on current market conditions and current cash flows from operations.
Outlook
Worldwide market conditions in the Company's Compressor and Engine & Power Train Businesses remained weak, but are projected to improve slightly in 2002. However, it is highly likely that first quarter 2002 earnings will be below those of first quarter 2001, with most improvement coming later in the year.
In an effort to improve profitability in its core operations, the Company intends to continue pursuing 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. The Company is also exploring and developing new product opportunities involving components, subassemblies and semi-finished or finished goods in a number of markets, both foreign and domestic. These initiatives may be undertaken individually or in connection with others in strategic partnering or similar other arrangements. 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,
2001 2000 2001 2000
Net Sales:
Compressor Products $156.7 $199.6 $804.6 $919.8
Engine & Power Train
Products 123.2 137.5 480.9 612.8
Pump Products 19.2 21.4 113.4 117.3
Total Net Sales $299.1 $358.5 $1,398.9 $1,649.9
Operating Income:
Compressor Products $2.3 $ 8.2 $54.3 $66.5
Engine & Power Train
Products 10.1 9.2 20.0 46.8
Pump Products 0.9 2.5 11.6 14.7
Corporate expenses (0.7) (1.8) (6.3) (7.8)
Nonrecurring items (6.1) -- (35.4) (33.5)
Total Operating Income $6.5 $18.1 44.2 $86.7
Interest expense (0.7) (2.2) (4.1) (6.7)
Interest income and
other, net 3.7 8.1 20.3 27.9
Income Before Taxes on
Income $9.5 $24.0 $60.4 $107.9
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
December 31, December 31,
(Dollars in millions) 2001 2000
Assets
Current Assets:
Cash and cash equivalents $317.6 $268.2
Accounts receivable, net 207.1 265.6
Inventories 261.9 274.9
Deferred income taxes and other 72.9 74.0
Total Current Assets 859.5 882.7
Property, Plant and Equipment - Net 431.9 444.7
Other Assets 228.4 225.7
Total Assets $1,519.8 $1,553.1
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $101.3 $123.5
Short-term borrowings 11.6 6.3
Accrued liabilities 140.9 150.5
Total Current Liabilities 253.8 280.3
Product Warranty and Self-Insured Risks 23.9 24.5
Long-term Debt 13.7 14.2
Deferred Income Taxes 3.0 --
Pension and Postretirement Benefits 218.3 205.4
Accrual for Environmental Matters 29.4 33.3
Total Liabilities 542.1 557.7
Stockholders' Equity 977.7 995.4
Total Liabilities and Stockholders' Equity $1,519.8 $1,553.1
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended Twelve Months Ended
(Dollars in millions) December 31, December 31,
2001 2000 2001 2000
Total Stockholders' Equity
Beginning Balance $965.4 $989.6 $995.4 $1,014.2
Comprehensive Income:
Net Income 6.1 14.8 42.8 66.1
Other Comprehensive
Income 12.2 (1.5) (18.6) (20.8)
Total Comprehensive
Income 18.3 13.3 24.2 45.3
Cash Dividends Declared (5.9) (6.0) (23.8) (24.5)
Stock Repurchases (0.1) (1.5) (18.1) (39.6)
Total Stockholders' Equity
Ending Balance $977.7 $995.4 $977.7 $995.4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Twelve Months Ended
(Dollars in millions) December 31,
2001 2000
Cash Flows From Operating Activities:
Net income $42.8 $66.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 72.0 71.2
Nonrecurring items 35.4 33.5
Accounts receivable 52.7 (5.8)
Inventories 8.7 (14.9)
Payables and accrued expenses (23.6) 20.2
Prepaid pension expense (31.4) (25.3)
Other 16.4 (11.0)
Cash Provided By Operating Activities 173.0 134.0
Cash Flows From Investing Activities:
Business acquisition, net of cash acquired (13.4) --
Capital expenditures (65.4) (64.0)
Cash Used in Investing Activities (78.8) (64.0)
Cash Flows From Financing Activities:
Dividends paid (23.8) (24.5)
Increase (decrease) in borrowings, net 4.9 (2.2)
Repurchases of common stock (18.1) (39.6)
Cash Used in Financing Activities (37.0) (66.3)
Effect of Exchange Rate Changes on Cash (7.8) (6.0)
Increase (Decrease) in Cash and Cash Equivalents 49.4 (2.3)
Cash and Cash Equivalents:
Beginning of Period 268.2 270.5
End of Period $317.6 $268.2
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; xiii) 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 fourth quarter results on Tuesday, January 22nd 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 Products Company's Internet web site at http://www.tecumseh.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