-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AYC4p8qF08VBrivPo9BG/py4/VTD0jqocJ8NvrgjpbusC5UiBRPe70clyAr/dNPD PrQeL39uqWAKFJgoLT/X8w== 0000950124-04-005160.txt : 20041028 0000950124-04-005160.hdr.sgml : 20041028 20041028171615 ACCESSION NUMBER: 0000950124-04-005160 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041028 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20041028 DATE AS OF CHANGE: 20041028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECUMSEH PRODUCTS CO CENTRAL INDEX KEY: 0000096831 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 381093240 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-00452 FILM NUMBER: 041103443 BUSINESS ADDRESS: STREET 1: 100 E PATTERSON ST CITY: TECUMSEH STATE: MI ZIP: 49286 BUSINESS PHONE: 5174238411 MAIL ADDRESS: STREET 1: 100 EAST PATTERSON STREET CITY: TECUMSEH STATE: MI ZIP: 49286 8-K 1 k89195e8vk.txt CURRENT REPORT, DATED OCTOBER 28, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): OCTOBER 28, 2004 TECUMSEH PRODUCTS COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MICHIGAN 0-452 38-1093240 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 100 EAST PATTERSON STREET TECUMSEH, MICHIGAN 49286 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (517) 423-8411 (NOT APPLICABLE) - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 cfr 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS The registrant's press release dated October 28, 2004, regarding its 2004 third quarter consolidated results is attached hereto as Exhibit 99.1. ITEM 7.01 REGULATION FD DISCLOSURE The registrant hosted its third quarter 2004 earnings conference call and webcast on Thursday, October 28, 2004 at 11:00 a.m. Eastern Time. Via the webcast, registrant presented its Third Quarter 2004 Investor Presentation, which contains a summary of registrant's financial results for the quarter ending September 30, 2004, as well as certain other financial and operating information. Pursuant to Regulation FD and the requirements of Item 7.01 of Form 8-K, registrant hereby furnishes the Third Quarter 2004 Investor Presentation as Exhibit 99.2 to this report. The Investor Presentation will be posted on the registrant's website, www.tecumseh.com, through at least November 11, 2004. Exhibit 99.2 is incorporated by reference under this Item 7.01. Note: The information in this report (including Exhibit 99.2) is furnished pursuant to Items 2.02 and 7.01 and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD or Item 7.01 of Form 8-K. -i- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TECUMSEH PRODUCTS COMPANY Date: October 28, 2004 By /s/ James S. Nicholson ------------------------------------- James S. Nicholson Vice President, Treasurer and Chief Financial Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 Press release dated October 28, 2004 99.2 Third Quarter 2004 Investor Presentation EX-99.1 2 k89195exv99w1.txt PRESS RELEASE DATED OCTOBER 28, 2004 EXHIBIT 99.1 TECUMSEH PRODUCTS COMPANY 100 E. PATTERSON STREET TECUMSEH, MI 49286 PRESS RELEASE TECUMSEH PRODUCTS COMPANY REPORTS THIRD QUARTER 2004 NET INCOME OF $0.67 PER SHARE Tecumseh, Michigan, October 28, 2004 .... Tecumseh Products Company (NASDAQ-TECUA, TECUB) announced today its 2004 third quarter consolidated results as summarized in the following Consolidated Condensed Statements of Operations.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended (Dollars in millions except per share amounts) September 30, September 30, ---------------------- ---------------------- 2004 2003 2004 2003 ---------- ------- -------- --------- NET SALES $478.6 $438.5 $1,439.8 $1,394.7 Cost of sales and operating expenses 403.4 379.7 1,245.3 1,212.7 Selling and administrative expenses 49.6 37.2 145.4 123.3 Restructuring charges, impairments and other items 2.0 (3.3) 5.6 38.8 ---------- ------- -------- --------- OPERATING INCOME 23.6 24.9 43.5 19.9 Interest expense (5.3) (6.8) (16.5) (18.3) Interest income and other, net 2.3 6.6 10.6 16.7 ---------- ------- -------- --------- INCOME BEFORE TAXES 20.6 24.7 37.6 18.3 Tax provision 8.3 5.7 14.3 3.4 ---------- ------- -------- --------- NET INCOME $12.3 $19.0 $23.3 $14.9 ---------- ------- -------- --------- BASIC AND DILUTED EARNINGS PER SHARE $0.67 $1.03 $1.26 $0.81 ---------- ------- -------- --------- WEIGHTED AVERAGE SHARES (in thousands of shares) 18,480 18,480 18,480 18,480 ========== ======= ======== ==========
Consolidated net sales in the third quarter of 2004 increased to $478.6 million from $438.5 million in 2003. Consolidated net sales year-to-date 2004 amounted to $1,439.8 million compared to $1,394.7 million in the same period of 2003. The effects of foreign currency translation increased sales by $7.6 million in comparison to the third quarter 2003 and $24.7 million in comparison to the first nine months of 2003. Excluding the effects of currency translation, sales in the third quarter and year-to-date 2004 increased primarily due to increased sales in the Company's Compressor and Engine & Power Train businesses. Consolidated net income for the third quarter of 2004 amounted to net income of $12.3 million or $0.67 per share compared to net income of $19.0 million or $1.03 per share in the third quarter of 2003. Reported results for the third quarter 2004 included restructuring charges of $2.0 million ($1.3 million net of tax or $0.07 per share) resulting from the continuation of the previously announced program related to the North American Compressor and Electrical Components businesses, as well as a new program related to the Company's Indian compressor operations. During the quarter, the Company also gave recognition to the benefits created by the Medical Prescription Drug, Improvement and Modernization Act of 2003. The effect of adoption increased three month and nine month earnings by $0.7 million and $1.4 million or $0.04 and $0.08 per share, respectively. Third quarter 2004 net income also reflected a higher effective tax rate which resulted from changes in the full year estimate of the 1 relationship of losses in foreign jurisdictions, where the Company does not recognize a related tax benefit, to worldwide pretax income as compared to the previous quarter's estimates. Included in reported results for the third quarter of 2003 was a net gain of $3.3 million ($2.1 million net of tax or $0.11 per share) resulting from the restructuring actions in the Engine & Power Train business announced in the second quarter of 2003. Third quarter results were also favorably impacted by several income tax related items. The resolution of prior years' federal income tax audits reduced the Company's currently payable provision for income taxes by $1.9 million or $0.10 per share. The Company's effective federal income tax rate was further reduced by adjustments to the provision for deferred taxes pertaining to unremitted earnings of foreign subsidiaries. Consolidated net income for the nine months ended September 30, 2004 amounted to $23.3 million or $1.26 per share compared to a $14.9 million or $0.81 per share for the same period in 2003. In addition to the 2004 third quarter charges noted above, reported results for the first nine months of 2004 included restructuring and asset impairment charges of $3.6 million ($2.3 million net of tax or $0.13 per share) from the previously announced actions involving the Compressor and Electrical Components businesses. In addition to the 2003 third quarter net gains from restructuring actions and the federal income tax-related items mentioned above, results for the first nine months of 2003 included a charge of $28.5 million ($18.2 million net of tax or $0.99 per share) related to the consolidation of operations in the Engine & Power Train business and a charge of $13.6 million ($8.7 million net of tax or $0.47 per share) recorded in the first quarter, related to environmental costs at the Company's Sheboygan Falls, Wisconsin facility. Exclusive of these respective restructuring charges, impairments and other items, third quarter 2004 operating results improved from the respective 2003 period, primarily due to better results in the Compressor business offset by lower results in the Company's other businesses and higher corporate expenses, reflecting costs incurred in order to comply with the Sarbanes-Oxley Act of 2002. Nine month 2004 results were lower than the respective prior year period in all business segments. COMPRESSOR BUSINESS Third quarter 2004 sales in the Company's compressor business increased by $25.1 million to $218.9 million from $193.8 million in the third quarter of 2003. The increase over the comparable quarter from the prior year was attributable to a favorable global market for compressor products sold into the original equipment markets of residential refrigerators and freezers and room air conditioners. Strong worldwide demand for small, high efficiency compressors used in refrigerators and freezers, such as those manufactured by the Company in Brazil and India, had a positive effect on volumes and pricing. Sales of compressors utilized in room air conditioning also increased, due in part to growth in exports from the Company's Indian operations. Alternatively, aftermarket volumes in North America were down from the prior year due to a mostly mild cooling season. The effect of foreign translation increased sales by $6.3 million. Compressor business sales in the first nine months of 2004 increased by $44.3 million, or approximately 7.1%, from the first nine months of 2003. The effects of foreign currency translation accounted for $16.6 million of the increase. In addition, declines in sales of compressors used in unitary air conditioning applications and aftermarket distribution in the U.S. were more than offset by higher levels of sales of compressors used in refrigeration and room air conditioning due to strong global demands. 2 Compressor business operating income for the third quarter of 2004 amounted to $22.5 million compared to $15.5 million in the third quarter of 2003. The increase in operating income in 2004 versus the comparable 2003 quarter reflected the overall higher sales volumes in the quarter and cost cutting initiatives in North America, partially offset by increases in commodity costs that were not fully recovered through pricing actions. Operating income for the first nine months of 2004 amounted to $53.7 million compared to $55.9 million for the first nine months of 2003. The decrease in operating income for the first nine months of 2004 versus the comparable 2003 period reflected the impact of commodity price increases, an unfavorable exchange rate in Brazil, and rapidly falling prices in India from lower import duties. ELECTRICAL COMPONENTS BUSINESS Electrical Components business sales were $102.1 million in the third quarter of 2004 compared to $101.5 million in the third quarter of 2003. Year-to-date 2004 sales amounted to $314.3 million compared to $315.8 million in the same period of 2003. Third quarter and year-to-date volume declines in gear motor and actuator sales were partially offset by higher sales to the automotive market and foreign currency-related increases in the Asian region. Electrical Components operating income for the third quarter of 2004 amounted to $3.5 million compared to $3.9 million in the third quarter of 2003. Segment operating profit year-to-date was $11.2 million compared to $11.5 million for the same period in 2003. The decline in third quarter operating income largely resulted from commodity cost increases. Year-to-date results were also impacted by warranty, response and expediting costs, incurred as a result of a product design change for an automotive segment customer. These costs were partially offset by the absence in 2004 of the $4.2 million write-up of FASCO inventory, recorded at December 31, 2002 in connection with purchase accounting that was subsequently recognized in cost of sales during the first quarter of 2003. ENGINE & POWER TRAIN BUSINESS Engine & Power Train business sales amounted to $128.6 million in the third quarter of 2004 compared to $113.2 million in the third quarter of 2003. Sales year-to-date in 2004 were $356.9 million compared to $357.1 million in the same period of 2003. The increase in sales for the third quarter reflected strong, early season demand of engines used in snow blowers and an extended season for engines used in walk behind rotary lawn mowers. This third quarter improvement was offset by the year-to-date decline of sales volume in Europe. Engine & Power Train business operating income in the third quarter of 2004 amounted to $2.2 million compared to $3.3 million in the third quarter of 2003. Despite the increase in sales, higher commodity and freight costs negatively impacted quarter results. For the first nine months of 2004, the Engine & Power Train business incurred an operating loss of $11.2 million compared to an operating loss of $7.1 million in 2003. The decline in third quarter and year-to-date results reflected many factors including currency losses of $1.6 million on dollar-dominated borrowings in Brazil, start up costs and ramp up inefficiencies at the Curitiba, Brazil facility, the impact of increased commodity costs, reduced profitability at the European operations due to the lower sales volumes, and product rework involving engines produced in the Company's facility in the Czech Republic that was necessitated by defective parts received from a supplier. The declines were partially offset by the improvement in the operating results of the North American engine operations due to the cost reductions achieved with the closure of the Douglas, Georgia and Sheboygan Falls, Wisconsin facilities last year. 3 PUMP BUSINESS Pump business sales in the third quarter of 2004 amounted to $28.5 million compared to $29.7 million in third quarter of 2003. Year-to-date sales amounted to $102.5 million in 2004 compared to $100.6 million the previous year. The 4.4% decrease in third quarter sales was primarily attributed to lower sales of water gardening products as retailers worked down inventories. Year-to-date increases reflected robust sales in the plumbing markets due to wet spring weather and strong OEM demand in the HVAC market. Operating income amounted to $3.1 million in the third quarter of 2004 compared to $3.3 million in the same period in 2003. Operating income in the first nine months of 2004 was $11.3 million compared to $11.7 million in 2003. The slight decrease in operating income was primarily attributable to higher engineering, administrative and promotional costs. RESTRUCTURING CHARGES, IMPAIRMENTS AND OTHER ITEMS Third quarter 2004 results included a reduction in workforce at one of the Company's Indian compressor facilities. The action affected approximately 100 employees at the cost of $1.0 million. Year-to-date 2004 results also included restructuring and impairment charges totaling $4.6 million related to previously announced facility consolidation actions affecting several of the Company's facilities in its North American Compressor and Electrical Components businesses. The consolidation actions within the Compressor business include a move of compressor machining and assembly operations from its Tecumseh, Michigan facility to its existing compressor facility located in Tupelo, Mississippi. In conjunction, aftermarket distribution operations located in Clinton, Michigan will be relocated to the Tecumseh facility. Charges related to the Compressor business action recognized during the third quarter included relocation costs of $0.3 million. With the asset impairment charges of $1.6 million recognized in the second quarter, year-to-date charges totaled $1.9 million. Additional severance and relocation costs, estimated to be approximately $1.2 million to $1.9 million, will be recognized during the fourth quarter of 2004 as the consolidation action is completed. Actions in the Electrical Components business include the closure of the Company's manufacturing facility in St. Clair, Missouri. Gear machining operations will be consolidated into the Company's Salem, Indiana facility and motor assembly operations will be consolidated into the Company's Piedras Negras and Juarez, Mexico facilities. Charges related to the Electrical Components business action recognized during the third quarter totaled $0.7 million and included $0.4 million of relocation costs incurred and employment related charges of $0.3 million. Total year-to-date costs of $2.7 million included asset impairment charges of $1.7 million and employment-related charges of $0.3 million recognized in the second quarter. Additional restructuring and impairment charges, estimated to be approximately $2.0 million to $3.1 million, will be recognized during the fourth quarter of 2004 as the plant closure and consolidation action is completed. Third quarter 2003 results were favorably affected by $3.3 million ($2.1 million net of tax or $0.11 per share) for net gains recognized pursuant to the restructuring actions announced in the second quarter involving the Engine & Power Train business. These actions included the closure of the Company's Douglas, Georgia and Sheboygan Falls, Wisconsin production facilities and the relocation of certain production capacities to the new Curitiba, Brazil facility and other existing U.S. locations. As a result of these actions, the Company incurred both charges and gains, which were recognized over the second and third quarters of 2003 in accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets," SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities," 4 and SFAS No. 88 "Employer's Accounting for Settlements & Curtailments of Defined Benefit Pension Plans and Termination Benefits." As of September 30, 2003, the Company recognized $31.0 million in charges and $5.8 million in gains with respect to these restructuring actions. Included in the charges were approximately $7.5 million in earned severance pay and future benefit costs relating to manpower reductions, $3.2 million in plant closing and exit costs incurred through September 30, 2003, and $20.3 million in asset impairment charges for idled equipment and facilities. The amount of severance pay and future benefit costs mentioned above included $0.8 million in curtailment losses related to the pension plan at the Sheboygan Falls, Wisconsin facility. The gains represented curtailment gains associated with other post-employment benefits. Under U.S. GAAP, such gains were not recognizable until the affected employees were severed and, accordingly, were recorded in the third quarter of 2003. Under SFAS No. 146, severance payments that require future service to be received is accrued as earned and other costs are only recognized to the extent a liability has been incurred. Accordingly, $28.5 million and $2.5 million of the charges were recognized in the second and third quarters, respectively. OUTLOOK The outlook for the balance of the year is subject to many variables which could significantly impact the Company's results. While the general economic climate is improving and past restructuring actions are providing positive contributions, the high level of commodity costs, weakness in the U.S. Dollar, and pricing pressures from Asian-based competition will challenge each of the Company's businesses in various ways making any predictions difficult. The Company mitigates only a portion of its exposure to future material price increases through forward contracts. Given the competitive nature of the industries in which the Company competes, the Company most likely will not be able to fully recover such cost increases through product pricing actions. The Company expects overall fourth quarter 2004 operating results to be lower than those of the fourth quarter 2003, excluding restructuring charges. Compressor segment results are expected to be improved over the prior year while other segments are expected to deteriorate. 5 RESULTS BY BUSINESS SEGMENTS (UNAUDITED)
Three Months Ended Nine Months Ended (Dollars in millions) September 30, September 30, -------------------- -------------------- 2004 2003 2004 2003 ------- -------- ------ ------ NET SALES: Compressor Products $218.9 $193.8 $664.9 $620.6 Electrical Components 102.1 101.5 314.3 315.8 Engine & Power Train Products 128.6 113.2 356.9 357.1 Pump Products 28.5 29.7 102.5 100.6 Other (a) 0.5 0.3 1.2 0.6 ------ ------ -------- -------- Total net sales $478.6 $438.5 $1,439.8 $1,394.7 ====== ====== ======== ======== OPERATING INCOME: Compressor Products $22.5 $15.5 $53.7 $55.9 Electrical Components 3.5 3.9 11.2 11.5 Engine & Power Train Products 2.2 3.3 (11.2) (7.1) Pump Products 3.1 3.3 11.3 11.7 Other (a) (0.9) (0.8) (2.7) (2.9) Corporate expenses (4.8) (3.6) (13.2) (10.4) Restructuring charges, impairments and other items (2.0) 3.3 (5.6) (38.8) ------ ------ -------- -------- Total operating income 23.6 24.9 43.5 19.9 Interest expense (5.3) (6.8) (16.5) (18.3) Interest income and other, net 2.3 6.6 10.6 16.7 ------ ------ -------- -------- INCOME BEFORE TAXES $20.6 $24.7 $37.6 $18.3 ====== ====== ======== ========
(a) "Other" consists of non-reportable business segments. 6 CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, December 31, (Dollars in millions) 2004 2003 ------------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 272.9 $ 344.6 Accounts receivable, net 245.6 235.0 Inventories 344.1 298.2 Deferred income taxes and other 123.9 102.3 -------- -------- Total current assets 986.5 980.1 PROPERTY, PLANT AND EQUIPMENT -- NET 536.7 554.6 GOODWILL AND OTHER INTANGIBLES 308.1 317.5 OTHER ASSETS 262.8 253.6 -------- -------- TOTAL ASSETS $2,094.1 $2,105.8 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $ 177.4 $ 172.4 Short-term borrowings 53.1 89.6 Accrued liabilities 193.0 172.6 -------- -------- Total current liabilities 423.5 434.6 LONG-TERM DEBT 326.3 327.6 DEFERRED INCOME TAXES 31.5 36.5 PENSION AND POSTRETIREMENT BENEFITS 231.3 233.3 PRODUCT WARRANTY AND SELF-INSURED RISKS 25.4 24.4 ACCRUAL FOR ENVIRONMENTAL MATTERS 43.6 44.6 -------- -------- Total liabilities 1,081.6 1,101.0 STOCKHOLDERS' EQUITY 1,012.5 1,004.8 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,094.1 $2,105.8 ======== ========
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Three Months Ended Nine Months Ended (Dollars in millions) September 30, September 30, --------------------- --------------------- 2004 2003 2004 2003 -------- -------- -------- ------- TOTAL STOCKHOLDERS' EQUITY BEGINNING BALANCE (B) $ 990.5 $1,000.6 $1,004.8 $ 978.9 Comprehensive income: Net income 12.3 19.0 23.3 14.9 Other comprehensive income 15.6 2.2 2.1 39.8 -------- -------- -------- ------- Total comprehensive income 27.9 21.2 25.4 54.7 Cash dividends declared (5.9) (5.9) (17.7) (17.7) -------- -------- -------- ------- TOTAL STOCKHOLDERS' EQUITY ENDING BALANCE $1,012.5 $1,015.9 $1,012.5 $1,015.9 ======== ======== ======== ========
(b) The June 30, 2004 Stockholder's Equity balance has been increased by $0.7 million from that previously reported to reflect the retroactive recognition of the effects of the Medical Prescription Drug, Improvement and Modernization Act of 2003, as permitted by the FASB Staff Position FAS 106-2. 7 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended (Dollars in millions) September 30, ------------------------ 2004 2003 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash provided by operating activities $ 34.5 $ 43.1 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisition, net of cash acquired --- 10.6 Capital expenditures (55.6) (66.0) ------ ------ Cash used in investing activities (55.6) (55.4) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (17.7) (17.7) Decrease in borrowings, net (35.4) (36.2) ------ ------ Cash used in financing activities (53.1) (53.9) ------ ------ EFFECT OF EXCHANGE RATE CHANGES ON CASH 2.5 13.6 ------ ------ DECREASE IN CASH AND CASH EQUIVALENTS (71.7) (52.6) CASH AND CASH EQUIVALENTS: Beginning of period 344.6 333.1 ------ ------ End of period $272.9 $280.5 ====== ======
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) the effect of terrorist activity and armed conflict; iii) weather conditions affecting demand for air conditioners, lawn and garden products, portable power generators and snow throwers; iv) the success of the Company's ongoing effort to bring costs in line with projected production levels and product mix; v) financial market changes, including fluctuations in interest rates and foreign currency exchange rates; vi) economic trend factors such as housing starts; vii) emerging governmental regulations; viii) availability and cost of materials, particularly commodities, including steel, copper and aluminum, whose cost can be subject to significant variation; ix) actions of competitors; x) the ultimate cost of resolving environmental and legal matters; 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) potential political and economic adversities that could adversely affect anticipated sales and production in Brazil; and xiv) potential political and economic adversities that could adversely affect anticipated sales and production in India, including potential military conflict with neighboring countries. 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. 8 Tecumseh Products Company will host a conference call to report on the third quarter 2004 results on Thursday, October 28, 2004 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 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. Contact: Pat Walsh Tecumseh Products Company 517-423-8455 9 EX-99.2 3 k89195exv99w2.txt THIRD QUARTER 2004 INVESTOR PRESENTATION EXHIBIT 99.2 THIRD QUARTER 2004 INVESTOR PRESENTATION JAMES S. NICHOLSON, VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER OCTOBER 28, 2004 Thank you, Rochelle. Good morning and welcome to our third quarter 2004 conference call. This call is being simultaneously broadcast on the internet and will also be archived for replay starting this afternoon. The replay can be accessed at our web site, www.tecumseh.com. Following our usual protocol, I will start our conversation this morning with some brief comments expanding on our press release. Following my comments, we will open the call for your questions. I would remind you that my prepared comments this morning, and the answers to your questions, contain forward-looking statements within the meaning of the Securities laws. I refer you to the cautionary statements contained in our press release concerning significant risks and uncertainties involved with forward looking statements that could cause actual results to differ materially from projected results. Our reported results for the third quarter 2004 amounted to a net profit of $12.3 million dollars or $0.67 cents per share, compared to a net profit of $19.0 million dollars or $1.03 cents per share in the third quarter of 2003. Both 2004 and 2003 third quarters included restructuring and impairment items. Included in third quarter 2004 reported results was a pre-tax charge of $1.0 million dollars, or $650 thousand dollars net of tax, related to the facility consolidation actions taken in both our Compressor and Electrical Components businesses as part of the programs that were announced and initiated in the second quarter. Also included in the third quarter 2004 is a $1 million dollar charge or $650 thousand dollars net of tax for a workforce reduction action in India. This action reduced the hourly workforce in the Company's facility located in Ballabgarh by approximately 100 people. With respect to the 2003 third quarter, results included a curtailment gain of $3.3 million dollars or $2.1 million dollars net of tax associated with the restructuring actions in the Engine group that took place in 2003. In addition to the restructuring charges, there were other items also worth noting to help understand the comparability of the two periods. Third quarter 2004 earnings were affected by a revision to our full year estimated effective tax rate which is now about 38%. The change resulted from a change in the ratio of foreign losses, for which we do not recognize a related tax benefit to total worldwide pre-tax income. The resulting tax rate in the third quarter of 2004 is approximately 40%. This is in contrast to an effective tax rate of 23% in the third quarter of 2003 due to a number of favorable items that affected that quarter. The resulting decline in third quarter earnings due to taxes was worth approximately $0.21 cents per share. In further comparing the third quarter year over year results, net interest expense increased from $200 thousand dollars to $3.0 million dollars representing a $0.10 cent per share impact to the bottom line. Excluding all these items, we saw a $0.14 cent per share improvement in operating earnings. All of this improvement was attributable to the Compressor segment. Consolidated sales for the quarter amounted to $478.6 million dollars, up from last year's third quarter sales of $438.5 million dollars, an increase of $40.1 million dollars or 9%. The effect of currency translation increased sales by $7.6 million dollars. The increase was 1 attributable to the Compressor and the Engine and Power Train businesses. I will address each of these changes more specifically in my comments regarding each business segment. While the sales growth was positive, some segments fell at the lower range of our expectations because summer temperatures in the U.S. have, for the most part, been mild. Hot weather is generally more favorable for Compressor and Electrical Component aftermarket operations. To best understand our overall results, it is best to look at them by business segment -- starting with the Compressor business. Compressor sales, in terms of dollars, rose by $25.1 million dollars, or approximately 13%. The effects of currency accounted for about 25% of the increase. The remainder of the increase can be attributable to very favorable global residential refrigeration markets as well as an improving room air conditioning market. Our global productive capacities for these small, high efficiency residential refrigeration compressors are nearly at peak volumes, and the high demand for these compressors has resulted in inflationary pricing. Total dollar sales in this segment are up 39%. Our global sales for compressors used in room air conditioners are also up by 50%. Compressor segment operating results improved by $7.0 million dollars, or 45%, excluding the restructuring and impairment charges related to this business. The improvement is reflective of the volume increases in the refrigeration and room air conditioning segments. The exchange rate between the U.S. Dollar and the Brazilian Real was a non-factor for the quarter as the average exchange rate was fairly consistent year over year. The outlook in the Compressor Group for the balance of the year, as always, is subject to variability due to currency rates, but currently we are still bullish on the sales forecast. I would like to emphasize that we are not seeing much relief on commodity costs and the effects will become more pronounced as our various supply contracts expire and are renegotiated. Keeping in mind the uncertainty regarding currency and commodity prices, which could quickly change our outlook, we are optimistic that the Compressor Group will show improved results in the fourth quarter in comparison to the prior year, exclusive of restructuring charges. Moving to the Electrical Components Group. For the quarter, the Group reported sales of $102.1 million dollars compared to $101.5 million dollars a year ago. A weak aftermarket season and volume declines in sales of gear motors were offset by gains in sales of motor parts to third parties and higher sales in the Asia/Pacific region. Electrical Components operating profit for the quarter was $3.5 million dollars compared to $3.9 million dollars a year ago, excluding the restructuring and impairment charges associated with this business. Like last quarter, the decline was largely attributable to the escalation of the prices of commodities, including copper and steel. Looking forward into the fourth quarter of the year for the Electrical Components business, our current forecasts indicate fairly consistent sales levels, or up slightly. Like the previous quarters, however, profits will be impacted by commodity costs. Now let's look at the Engine and Power Train Group. Sales in the Engine and Power Train Group were up $15.4 million dollars, or approximately 14%, from the prior year's third quarter. North America sales accounted for 95% of this increase and were most notable in 2 engines used for walk-behind rotary lawn mowers and snow throwers. Sell through of walk- behind mowers was very good and extended the build season into the third quarter. We sold approximately 100 thousand more walk-behind engines in the third quarter than last year. The snow season is also looking like one of the best on record. Our third quarter volumes are up 5 1/2 percent over a very good last year despite some share losses. For the quarter, the Group's operating results declined by $1.1 million dollars. The decline can be attributed to the same factors identified in the second quarter. Commodity costs are affecting us globally and the late ramp up of our new Brazilian operations has caused inefficiencies and cost premiums within our U.S. operations. In addition, the high fixed costs of our European production facilities remain a drag on earnings given very low production volumes, particularly in the third quarter when volumes are at their lowest at this facility. Looking forward to the balance of the year for the Engine and Power Train business, we expect sales to be flat to slightly higher, but our outlook is for further decline in operating profit based upon increasing cost pressures and continuing cost increases in the European market. Now for the Pump Group. Pump operations experienced a decline in sales of approximately 4% for the quarter. Sales within most segments were actually up, except for the water gardening category. Here sales were off 30% as a major retail customer sought to reduce their inventories in preparation of re-sourcing this product to a Chinese-based supplier. Operating income in the segment declined by $200 thousand dollars in the third quarter due to higher engineering, administrative and benefit costs. Looking forward, we expect sales to be relatively flat with declines in some markets being offset by others. However, fourth quarter profitability will be challenged based upon our increasing costs. In the aggregate, profitability in the fourth quarter will be down from last year's fourth quarter. Like the third quarter, the two largest factors will be net interest expense and taxes. During our call last quarter, I mentioned that the Company had begun the implementation of Oracle's E-Business Suite globally. The implementation is on schedule. Capital expenditures in the quarter related to the implementation amounted to approximately $3.6 million dollars. In addition, we anticipate continued research and development spending, as pending regulations in the compressor, motor and engine segments all pose opportunities in the marketplace. We still have significant cash balances and anticipate generating sufficient cash to fund these planned expenditures and pay dividends. As always, we continue to assess potential restructuring, cost reduction actions and/or strategic business acquisitions that will enhance our competitiveness and fit into the overall plan. Such actions could result in material charges to our reported results in future periods. That concludes my prepared comments for this morning. I am now be pleased to take your questions. 3 -----END PRIVACY-ENHANCED MESSAGE-----