Press Releases
Tecumseh Products Company Reports Second Quarter 2001 Net of $0.94 Per Share
PRNewswire
TECUMSEH, Mich.
Jul 25, 2001
Tecumseh Products Company (NASDAQ: TECUA)(NASDAQ: TECUB) announced today its 2001 second 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 Six Months Ended
per share amounts) June 30, June 30,
2001 2000 2001 2000
Net Sales $382.0 $466.4 $786.7 $942.6
Cost of sales and operating expenses 322.8 393.0 678.2 793.1
Selling and administrative expenses 32.7 32.6 63.2 63.5
Nonrecurring items --- --- --- 33.5
Operating Income 26.5 40.8 45.3 52.5
Interest expense (1.3) (1.5) (2.5) (2.9)
Interest income and other, net 4.6 6.1 9.2 13.0
Income Before Taxes on Income 29.8 45.4 52.0 62.6
Taxes On Income 12.3 16.9 20.5 25.1
Net Income $17.5 $28.5 $31.5 $37.5
Basic and Diluted Earnings Per Share $0.94 $1.47 $1.68 $1.92
Weighted Average Shares (in thousands
of shares) 18,572 19,327 18,704 19,471
Net income for the second quarter of 2001 amounted to $17.5 million or $0.94 per share compared with net income of $28.5 million or $1.47 per share in the second quarter of 2000. Results for the second quarter of 2001 were unfavorably impacted by the settlement of a $1.3 million foreign tax claim which had the effect of increasing the effective tax rate for the quarter to 41%. Net income for the six months ended June 30, 2001 amounted to $31.5 million or $1.68 per share. Nonrecurring charges of $23.3 million, net of tax, had the effect of reducing reported earnings for the first half of 2000 to $37.5 million or $1.92 per share. Consolidated sales for the second quarter of 2001 were $382.0 million, compared to sales of $466.4 million in the same quarter of 2000. Sales for the six months ended June 30, 2001 amounted to $786.7 million compared to sales of $942.6 million in the first half 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 Products
Second quarter 2001 sales in the Company's Compressor Products declined to $236.1 million from $266.1 million in the second quarter of 2000. This decline was caused primarily by lower demand in all major markets served by the Company's products when compared to 2000. Sales of air conditioning compressors, both in the unitary and room air conditioning markets, experienced decreases from 2000 levels. The room air market has been particularly hard hit from 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. Compressor Products sales in the six months ended June 30, 2001 declined $40.8 million or approximately 8% from the first six months of 2000. The decrease in sales for both the three and six month periods ended June 30, 2001 resulted primarily from significantly reduced demand and continued price competition.
Compressor Products operating income for the second quarter of 2001 amounted to $23.3 million compared to $27.5 million in the second quarter of 2000. Operating income for the six months ended June 30, 2001 amounted to $36.8 million compared to $48.7 million in the first six months of 2000.
Results from the Company's Brazilian compressor operations remained strong and comprised approximately 43% and 58% of the total Compressor Products operating income in the three and six month periods ended June 30, 2001, respectively. Operations in India produced a profit in the second quarter of 2001 reflecting improved operating efficiencies.
Engine & Power Train Products
Engine & Power Train Products sales amounted to $109.2 million in the second quarter of 2001 compared to $162.4 million in the second quarter of 2000. Sales in the first half of 2001 were $246.3 million compared to $358.7 million in the first half of 2000. The Engine & Power Train Products Group generated an operating loss of $0.1 million in the second quarter of 2001 compared to operating income of $9.4 million in the second quarter of 2000. Operating income in the first half of 2001 amounted to $4.4 million compared to $31.7 million in 2000.
Demand for the Company's lawn and garden engines was severely impacted by poor Spring weather conditions, high customer inventories and a soft economy which resulted in generally weak retail demand for walk behind rotary mowers, the primary application for the Company's engines. Sales of engines in the European market were significantly reduced in the second quarter of 2001 compared to the second quarter of 2000. Year-to-date results also show a significant reduction compared to 2000.
Pump Products
Sales and operating profits in the Pump Products both reflected slight decreases over 2000 levels. Sales in the second quarter of 2001 amounted to $36.7 million compared to $37.9 million in 2000. Year-to-date sales amounted to $68.0 million in 2001 compared to $70.7 million the previous year. Operating income amounted to $5.0 million in the quarter ended June 30, 2001 compared to $5.8 million in the same period of 2000. Operating income in the first half of 2001 decreased to $8.0 million from $9.9 million in 2000.
A weak economy and generally soft retail demand, particularly for the Company's water gardening products, were primarily responsible for these reduced results.
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 strong during the last half of the year, but risks exist relative to the Brazilian energy crisis and weakening economy. While the Company anticipates a reasonably robust market for its snow thrower engines during the second half of the year, demand for other Engine & Power Train Products is expected to remain weak. As a result, 2001 consolidated second half earnings before special charges are expected to approximate the earnings level reported for the second half of 2000.
Earlier this month, the Company offered an early retirement incentive package to approximately 20% of the North American salaried employees in both the Compressor Products Group and Engine & Power Train Products Group. Eligible employees have until September 14, 2001 to elect retirement under the program. The Company hopes to achieve substantial payroll savings as a result of this program. A nonrecurring charge will be incurred in the third quarter of this year reflecting pension and health care benefit costs associated with those employees electing early retirement. The amount of this charge, as well as the amount of potential ongoing cost reductions, will depend on the salaries of employees who elect to participate in this program.
It is highly likely that the Company will undertake further restructuring and/or realignment actions designed to address capacity issues, as well as to improve overall cost structure and competitive position in all its major markets. Such actions may include further personnel reductions, plant closing and/or plant and equipment relocations to lower cost areas, either domestic or foreign. As these restructuring plans are finalized, future results will 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 Six Months Ended
(Dollars in millions) June 30, June 30,
2001 2000 2001 2000
Net Sales:
Compressor Products $236.1 $266.1 $472.4 $513.2
Engine & Power Train Products 109.2 162.4 246.3 358.7
Pump Products 36.7 37.9 68.0 70.7
Total Net Sales $382.0 $466.4 $786.7 $942.6
Operating Income:
Compressor Products $23.3 $27.5 $36.8 $48.7
Engine & Power Train Products (0.1) 9.4 4.4 31.7
Pump Products 5.0 5.8 8.0 9.9
Corporate expenses (1.7) (1.9) (3.9) (4.3)
Nonrecurring items --- --- --- (33.5)
Total Operating Income 26.5 40.8 45.3 52.5
Interest expense (1.3) (1.5) (2.5) (2.9)
Interest income and other, net 4.6 6.1 9.2 13.0
Income Before Taxes on Income $ 29.8 $ 45.4 $ 52.0 $62.6
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
(Dollars in millions) 2001 2000
Assets
Current Assets:
Cash and cash equivalents $245.0 $268.2
Accounts receivable, net 267.7 265.6
Inventories 274.6 274.9
Deferred income taxes and other 73.0 74.0
Total Current Assets 860.3 882.7
Property, Plant and Equipment - Net 435.6 444.7
Other Assets 249.3 225.7
Total Assets $1,545.2 $1,553.1
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $126.4 $123.5
Short-term borrowings 7.9 6.3
Accrued liabilities 158.5 150.5
Total Current Liabilities 292.8 280.3
Product Warranty and Self-Insured Risks 22.7 24.5
Long-term Debt 13.9 14.2
Pension and Postretirement Benefits 205.5 205.4
Accrual for Environmental Matters 32.9 33.3
Total Liabilities 567.8 557.7
Stockholders' Equity 977.4 995.4
Total Liabilities and Stockholders' Equity $1,545.2 $1,553.1
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended Six Months Ended
(Dollars in millions) June 30, June 30,
2001 2000 2001 2000
Total Stockholders' Equity
Beginning Balance $978.4 $996.0 $995.4 $1,014.2
Comprehensive Income:
Net Income 17.5 28.5 31.5 37.5
Other Comprehensive Income (8.2) (3.6) (22.3) (8.1)
Total Comprehensive Income 9.3 24.9 9.2 29.4
Cash Dividends Declared (5.9) (6.2) (11.9) (12.4)
Stock Repurchases (4.4) (11.0) (15.3) (27.5)
Total Stockholders' Equity
Ending Balance $977.4 $1,003.7 $977.4 $1,003.7
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
(Dollars in millions) June 30,
2001 2000
Cash Flows From Operating Activities:
Net income $31.5 $37.5
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 37.3 37.8
Nonrecurring items --- 33.5
Accounts receivable (12.5) (44.1)
Inventories (4.1) (13.2)
Payables and accrued expenses 24.1 47.5
Prepaid pension expense (14.5) (12.5)
Other (5.0) (9.5)
Cash Provided By Operating Activities 56.8 77.0
Cash Flows From Investing Activities:
Business acquisition, net of cash acquired (15.5) ---
Capital expenditures (30.8) (31.3)
Cash Used in Investing Activities (46.3) (31.3)
Cash Flows From Financing Activities:
Dividends paid (11.9) (12.4)
Increase (decrease) in borrowings, net 1.8 (4.2)
Repurchases of common stock (15.3) (27.5)
Cash Used In Financing Activities (25.4) (44.1)
Effect of Exchange Rate Changes on Cash (8.3) (2.2)
Decrease in Cash and Cash Equivalents (23.2) (0.6)
Cash and Cash Equivalents:
Beginning of Period 268.2 270.5
End of Period $245.0 $269.9
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; 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) 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 and the ultimate cost of those initiatives; and xiii) 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 second quarter results on Wednesday, July 25th 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/ . Recent quarterly earnings information and press releases can be obtained at no charge, via fax, by calling "Company News On Call" at 1-800-758-5804, 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, +1-517-423-8455
Website: http://www.tecumseh.com/
Company News On-Call: http://www.prnewswire.com/comp/842875.html