-----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, Wcqm81o75LgRMKOU04VWCSffy8WbaF2dpXXSxpNKvrmDO0XAv2XkCRkbuw+O838q dZ4IjdT80ChBWngUhriGlw== 0000950124-05-004768.txt : 20050808 0000950124-05-004768.hdr.sgml : 20050808 20050808145716 ACCESSION NUMBER: 0000950124-05-004768 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050808 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20050808 DATE AS OF CHANGE: 20050808 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: 051005649 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 k97541e8vk.txt CURRENT REPORT, DATED AUGUST 8, 2005 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): AUGUST 8, 2005 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 August 8, 2005, regarding its first quarter 2005 consolidated results is attached hereto as Exhibit 99.1. ITEM 7.01 REGULATION FD DISCLOSURE The registrant hosted its second quarter 2005 earnings conference call and webcast on Thursday, August 8, 2005 at 11:00 a.m. Eastern Time. Via the webcast, registrant presented its Second Quarter 2005 Investor Presentation, which contains a summary of registrant's financial results for the quarter ending June 30, 2005, 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 Second Quarter 2005 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 August 28, 2005. 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. -1- 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: August 8, 2005 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 August 8, 2005 99.2 Second Quarter 2005 Investor Presentation
EX-99.1 2 k97541exv99w1.txt PRESS RELEASE DATED AUGUST 8, 2005 Tecumseh Products Company Exhibit 99.1 100 E. Patterson Street Tecumseh, MI 49286 PRESS RELEASE TECUMSEH PRODUCTS COMPANY REPORTS SECOND QUARTER 2005 RESULTS Tecumseh, Michigan, August 8, 2005 . . . . Tecumseh Products Company (NASDAQ-TECUA, TECUB) announced today its 2005 second quarter consolidated results as summarized in the following Consolidated Condensed Statements of Operations.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended (Dollars in millions except per share amounts) June 30, June 30, -------------------------- --------------------------- 2005 2004 2005 2004 =============================================================================================================================== NET SALES $ 461.9 $ 484.2 $ 926.3 $ 961.2 Cost of sales and operating expenses 422.7 421.6 853.5 843.1 Selling and administrative expenses 46.5 51.1 94.5 95.8 Impairments, restructuring charges and other items 109.8 3.6 109.9 3.6 - ------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME (LOSS) (117.1) 7.9 (131.6) 18.7 Interest expense (6.8) (5.6) (14.3) (11.2) Interest income and other, net 1.7 3.8 5.0 8.4 - ------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE TAXES (122.2) 6.1 (140.9) 15.9 Tax provision (benefit) 0.3 2.1 (6.1) 5.5 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $(122.5) $ 4.0 $(134.8) $ 10.4 - ------------------------------------------------------------------------------------------------------------------------------- BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (6.63) $ 0.22 $ (7.30) $ 0.56 - ------------------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES (in thousands of shares) 18,480 18,480 18,480 18,480 ===============================================================================================================================
Consolidated net sales in the second quarter of 2005 decreased to $461.9 million from $484.2 million in 2004. Consolidated net sales for the first half of 2005 amounted to $926.3 million compared to $961.2 million in the first half of 2004. Excluding an increase in sales of $18.3 million for the quarter and $36.3 million year to date resulting from the effect of changes in foreign currency exchange rates, sales decreased $40.6 million versus the same quarter in the prior year and $71.2 million year to date. The lower sales were primarily due to lower volumes in the Engine & Power Train segment in both North America and Europe. Sales declines were also experienced in the Electrical Components and Pump segments. Consolidated results for the second quarter of 2005 amounted to net loss of $122.5 million or $6.63 per share compared to net income of $4.0 million or $0.22 per share in the second quarter of 2004. Reported results for the second quarter 2005 included a goodwill impairment charge related to the Electrical Components business of $108.0 million $(5.84 per share) and restructuring and asset impairment charges of $1.8 million $(1.6 million net of tax or $0.09 per share) related to a new action in the Engine & Power Train business $(1.1 million) and the continuation of previously announced actions in both the Compressor $(0.2 million) and Electrical Components $(0.5 million) segments. Reported results for the second quarter 2004 included restructuring and asset impairment charges of $3.6 million $(2.3 million net of tax or $0.13 per share) involving the Compressor and Electrical Components businesses. 1 Consolidated net loss for the six months ended June 30, 2005 amounted to $134.8 million or $7.30 per share compared to net income of $10.4 million $0.56 per share for the same period in 2004. Excluding the impairment and restructuring charges, operating results were lower than the prior year second quarter across all business segments, with the most substantial declines in the Compressor and Engine & Power Train segments. COMPRESSOR BUSINESS Second quarter 2005 sales in the Company's compressor business increased to $247.6 million from $234.1 million in the second quarter of 2004. Compressor business sales in the first six months of 2005 increased to $488.6 million from $446.0 million in the first six months of 2004. The increase for both the quarter and year to date from the prior year was mainly attributable to the effect of foreign currency translation that increased sales by $17.1 million and $33.4 million, respectively. Volume increases of compressor products that are primarily manufactured by the Company in its Brazilian and Indian facilities and sold into the original equipment markets for residential refrigerators and freezers and volume increases in compressor products for commercial applications were largely offset by declines in sales of compressors utilized in room air conditioners. Compressor business operating income for the second quarter of 2005 amounted to $7.4 million compared to $18.8 million in the second quarter of 2004. Operating income for the six months ended June 30, 2005 amounted to $16.0 million compared to $30.7 million for the first six months of 2004. The decrease in operating income for the second quarter and year to date versus the comparable 2004 periods reflected the effects of a weaker U.S. Dollar and an unfavorable mix of sales. During the second quarter, the U.S. Dollar was on average 17% weaker versus the Brazilian Real and 4% weaker versus the Euro. ELECTRICAL COMPONENTS BUSINESS Electrical Components business sales were $102.4 million in the second quarter of 2005 compared to $105.2 million in the second quarter of 2004. The $2.8 million reduction in sales was primarily attributable to volume declines in the automotive seat actuator, small engine starter and mobile HVAC businesses. First half 2005 sales amounted to $202.6 million compared to $212.2 million in the first half of 2004. In addition to the volume declines from the second quarter mentioned above, the Company experienced volume declines in residential and commercial aftermarket, blowers and gear motors during the first quarter to bring the year to date decline in comparative sales to $9.6 million. Electrical Components operating income for the second quarter of 2005 amounted to $0.2 million compared to $4.0 million in the second quarter of 2004. Segment operating loss for the first half of the year was $0.8 million compared to operating income of $7.4 million for the same period in 2004. The decline in operating income in both the quarter and year to date largely resulted from lower sales volumes, higher commodity costs in excess of pricing recoveries, and unanticipated operational inefficiencies related to the closure of the St. Clair facility, partially offset by lower amortization of intangible assets. ENGINE & POWER TRAIN BUSINESS Engine & Power Train business sales amounted to $78.7 million in the second quarter of 2005 compared to $104.0 million in the second quarter of 2004. Sales in the first half of 2005 were $173.6 million compared to $228.3 million in the first half of 2004. The decline in sales for the second quarter and year to date was primarily the result of the loss of business on walk behind rotary lawn applications 2 with a single customer during the first quarter and other reductions in walk behind volume. Additionally, volumes were lower in the transaxle business and in other engine lines utilized on various utility products. Engine & Power Train business operating loss in the second quarter of 2005 amounted to $15.5 million compared to a loss of $10.7 million in the second quarter of 2004. For the first half of 2005, the business incurred an operating loss of $36.4 million compared to an operating loss of $13.6 million in 2004. The decline in quarter and year to date results reflects losses in volume and increases in commodity, transportation and tooling costs. Additionally, during the first quarter, the Company experienced increased warranty response and expediting costs related to a quality issue at a transmission business customer. Continued reductions in profitability in Europe also contributed to the increase in the quarter and year to date loss. Engine & Power Train losses were substantially due to the significant costs associated with excess capacities in the U.S. and Europe. The excess capacity situation was exacerbated by the shift of production to the Company's Brazilian manufacturing facility resulting in duplicate capacities. While the favorable impact of the normal seasonal snow thrower-related business should improve results in the second half of the year compared to the first half, substantial cost reductions and volume improvements will be necessary for sustained improvement. The Company intends to complete these cost reductions throughout 2005. AlixPartners' involvement commenced as of July 31, 2005. PUMP BUSINESS Pump business sales in the second quarter of 2005 amounted to $32.7 million compared to $40.6 million in same period in 2004. First half sales amounted to $60.6 million in 2005 compared to $74.0 million the previous year. The 18.1% reduction in year to date sales was primarily attributable to the loss of water gardening business at one mass market retailer. Operating income amounted to $4.2 million in the second quarter of 2005 compared to $4.8 million in the same period in 2004. Operating income in the first half of 2005 was $6.5 million compared to $8.1 million in 2004. The decrease in operating income was primarily attributable to the reductions in sales volumes offset by reductions in engineering and selling and administration costs. IMPAIRMENTS, RESTRUCTURING CHARGES AND OTHER ITEMS Second quarter 2005 results include an impairment charge of $108.0 million related to the goodwill associated with the 2002 acquisition of FASCO (which is included in the Electrical Components segment). As previously disclosed, the failure to achieve the business plan, coupled with expected future market conditions, has caused the Company to revisit the assumptions utilized to determine FASCO's estimated fair value in the impairment assessment performed at December 31, 2004. The deterioration of volumes and the Company's inability to recover higher commodity and transportation costs through price increases has resulted in revised expected cash flows for FASCO. Based on the revised estimates of cash flow, FASCO's fair value has deteriorated from the previous assessment and, as a result, a goodwill impairment of $108.0 million was recognized representing approximately half of the goodwill associated with this segment. The Company also recognized restructuring costs of $1.8 million in the second quarter of 2005. These costs included $0.2 million of facility consolidation costs in the North American Compressor business and a $0.5 million additional impairment charge related to the St. Clair, Missouri Electrical Components facility, both ongoing programs nearing or at completion. The remaining $1.1 million of 3 restructuring costs relate to the first step in the Company's efforts to reduce its excess capacity in the European Engine & Power Train operations. Included in the Company's plans for this operation is a workforce reduction of 100 personnel, which is expected to be completed this year at a cost of $2.5 million. Second quarter 2004 results include impairment and restructuring charges totaling $3.6 million related to facility consolidation actions affecting several of the Company's facilities in its North American Compressor and Electrical Components businesses. OUTLOOK Information in this "Outlook" section should be read in conjunction with the cautionary language and discussion of risks included below. The outlook for the remainder of the year is subject to the same variables that have negatively impacted the Company's year to date results. Commodity costs, key currency rates, particularly the Brazilian Real, and weather will remain key factors to any rebound in the second half of the year. Recent indicators provide some encouragement that the effect of these factors may moderate. While weather in North and South America has not been conducive to either OEM or aftermarket sales during the first half of the year, the recent heat wave in the U.S. should help aftermarket operations in the Compressor and Electrical Components businesses over the rest of the summer. In addition, there has been some improvement in steel prices, although slight in comparison to the increases experienced over the last 18 months. Additionally, the Company has been aggressively executing cost cutting actions. Global headcounts have been reduced by 1,600 since March 31, 2005, and the Company has changed retiree and healthcare benefits in the U.S. with an expected annual benefit of $4.0 million. The Company has engaged AlixPartners to assist in the completion of the Engine & Power Train Group restructuring, where substantial cost reductions, associated with the elimination of duplicate capacities, are expected to benefit future periods. Accordingly, the Company expects second half results to be better than those of the first half of the year, but to lag comparable 2004 results. The Company will continue to focus its efforts on improving the profitability and competitiveness of its worldwide operations. It is likely that additional production relocation and consolidation initiatives will take place during 2005 that could have an effect on the consolidated financial position and future results of operations of the Company. LIQUIDITY AND CAPITAL RESOURCES The negative results for the first half of the year, as well as investment in various components of working capital, including accounts receivable and inventory, resulted in using $55.5 million in cash to fund operations. The Company also used existing cash balances to prepay $50 million of the Company's Guaranteed Senior Notes, pay dividends, and fund capital expenditures related to new product expansions in Brazil and India. The negative results experienced over the last nine months and recognition of the goodwill impairment charge also required that the Company seek amendments to its debt covenants related to both its Senior Guaranteed Notes and Revolving Credit Facility. New terms of the agreements provide for security interests in certain of the Company's assets and specific covenants related to EBITDA and capital expenditures through December 2006. In addition, the terms of the agreement permit the payment of dividends, presuming continued compliance with these temporary covenants and subject to minimum levels of EBITDA, beginning with the fourth quarter of 2005 through the first quarter of 2007. 4
RESULTS BY BUSINESS SEGMENTS (UNAUDITED) - ----------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended (Dollars in millions) June 30, June 30, --------------------------- ------------------------ 2005 2004 2005 2004 ================================================================================================================= NET SALES: Compressor Products $ 247.6 $ 234.1 $ 488.6 $ 446.0 Electrical Components 102.4 105.2 202.6 212.2 Engine & Power Train Products 78.7 104.0 173.6 228.3 Pump Products 32.7 40.6 60.6 74.0 Other (a) 0.5 0.3 0.9 0.7 - ----------------------------------------------------------------------------------------------------------------- Total net sales $ 461.9 $ 484.2 $ 926.3 $ 961.2 ================================================================================================================= OPERATING INCOME (LOSS): Compressor Products $ 7.4 $ 18.8 $ 16.0 $ 30.7 Electrical Components 0.2 4.0 (0.8) 7.4 Engine & Power Train Products (15.5) (10.7) (36.4) (13.6) Pump Products 4.2 4.8 6.5 8.1 Other (a) (1.0) (0.9) (1.9) (1.8) Corporate expenses (2.6) (4.5) (5.1) (8.5) Impairments, restructuring charges and other items (109.8) (3.6) (109.9) (3.6) - ----------------------------------------------------------------------------------------------------------------- Total operating income (loss) (117.1) 7.9 (131.6) 18.7 Interest expense (6.8) (5.6) (14.3) (11.2) Interest income and other, net 1.7 3.8 5.0 8.4 - ----------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE TAXES $(122.2) $ 6.1 $(140.9) $ 15.9 ================================================================================================================
(a) "Other" consists of non-reportable business segments. 5
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) - ------------------------------------------------------------------------------------------------ JUNE 30, December 31, (Dollars in millions) 2005 2004 ================================================================================================ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 75.0 $ 227.9 Accounts receivable, net 254.2 220.4 Inventories 417.9 394.2 Deferred income taxes and other 134.4 84.7 - ------------------------------------------------------------------------------------------------ Total current assets 881.5 927.2 PROPERTY, PLANT AND EQUIPMENT -- NET 584.9 554.8 GOODWILL AND OTHER INTANGIBLES 193.8 305.9 OTHER ASSETS 284.3 274.9 - ------------------------------------------------------------------------------------------------ TOTAL ASSETS $1,944.5 $2,062.8 ================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $ 180.8 $ 178.1 Short-term borrowings 93.1 68.8 Accrued liabilities 146.7 174.6 - ------------------------------------------------------------------------------------------------ Total current liabilities 420.6 421.5 LONG-TERM DEBT 282.6 317.3 DEFERRED INCOME TAXES 7.0 8.0 PENSION AND POSTRETIREMENT BENEFITS 231.9 235.2 PRODUCT WARRANTY AND SELF-INSURED RISKS 20.0 21.2 ACCRUAL FOR ENVIRONMENTAL MATTERS 40.6 41.3 OTHER NON-CURRENT LIABILITIES 33.7 --- - ------------------------------------------------------------------------------------------------ Total Liabilities 1,036.4 1,044.5 STOCKHOLDERS' EQUITY 908.1 1,018.3 - ------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,944.5 $2,062.8 ================================================================================================
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - ----------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended (Dollars in millions) June 30, June 30, -------------------------- --------------------------- 2005 2004 2005 2004 =========================================================================================================== TOTAL STOCKHOLDERS' EQUITY BEGINNING BALANCE $1,001.2 $1,002.9 $1,018.3 $1,004.8 Comprehensive income (loss): Net income (loss) (122.5) 4.0 (134.8) 10.4 Other comprehensive income (loss) 35.3 (11.2) 36.4 (13.6) - ----------------------------------------------------------------------------------------------------------- Total comprehensive loss (87.2) (7.2) (98.4) (3.2) Cash dividends declared (5.9) (5.9) (11.8) (11.8) - ----------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY ENDING BALANCE $ 908.1 $ 989.8 $ 908.1 $ 989.8 ===========================================================================================================
6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - -------------------------------------------------------------------------------------- Six Months Ended (Dollars in millions) June 30, ------------------------ 2005 2004 ====================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: - -------------------------------------------------------------------------------------- Cash provided by (used in) operating activities $ (55.5) $ 27.9 - -------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (59.4) (37.7) - -------------------------------------------------------------------------------------- Cash used in investing activities (59.4) (37.7) - -------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (11.8) (11.8) Increase (Decrease) in borrowings, net 35.8 (29.8) Repayments of long term debt (50.0) --- - -------------------------------------------------------------------------------------- Cash used in financing activities (26.0) (41.6) - -------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (12.0) (10.1) - -------------------------------------------------------------------------------------- DECREASE IN CASH AND CASH EQUIVALENTS (152.9) (61.5) CASH AND CASH EQUIVALENTS: Beginning of period 227.9 344.6 - -------------------------------------------------------------------------------------- End of period $ 75.0 $283.1 ======================================================================================
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. Tecumseh Products Company will host a conference call to report on the second quarter 2005 results on Monday, August 8, 2005 at 11:00 a.m. ET. The call will be broadcast live over the Internet and then 7 available for replay through the Investor Relations section of Tecumseh Products Company's website at www.tecumseh.com. Press releases and other investor information can be accessed via the Investor Relations section of Tecumseh Products Company's Internet web site at http://www.tecumseh.com. Contact: Pat Walsh Tecumseh Products Company 517-423-8455 8 EX-99.2 3 k97541exv99w2.txt SECOND QUARTER 2005 INVESTOR PRESENTATION EXHIBIT 99.2 SECOND QUARTER 2005 INVESTOR PRESENTATION JAMES S. NICHOLSON, VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER AUGUST 8, 2005 Thank you, Cindy. Good morning and welcome to our second quarter 2005 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. I will start our conversation this morning with some brief comments, expanding on our press release both in terms of our actual results for the quarter, as well as a preliminary look at the rest of the year. Following my comments, we will open up 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. Reported results for the second quarter 2005 amounted to a net loss of $122.5 million or $6.63 per share, compared to net income of $4.0 million or $0.22 per share in the second quarter of 2004. Of this loss, $108 million dollars, or $5.84 per share, was attributable to a goodwill impairment charge related to the Electrical Components business, and $1.8 million dollars, or $0.09 per share, was attributable to restructuring-related charges. Excluding these charges, the operating results decline was consistent with that experienced in the first quarter of the year. Nearly every risk we saw at the beginning of the year, including commodity costs, currency and weather, that worked against us during the first quarter also were prime factors in the second quarter. Some of those factors, mainly the exchange rate of the Brazilian Real and the cost of copper, worsened in the second quarter. If one factor did improve, it is weather in the U.S. Sustained high temperatures which began in June, while not really a factor in the second quarter, will benefit the third quarter. In addition, like the first quarter, volumes were a factor in most of our business segments. While results declined in all segments, the most significant declines during this quarter involved the Compressor Group, followed by the Engine & Power Train and Electrical Components businesses. Consolidated sales for the quarter amounted to $461.9 million dollars, down from last year's first quarter sales of $484.2 million dollars. Excluding the effect of currency translation that increased sales by $18.3 million dollars, sales declined by $40.6 million or 8.4%. This decrease was primarily attributable to the Engine & Power Train business where sales were down by $25.3 million dollars. Sales also declined in the Pump and Electrical Components businesses. I will address these changes more specifically in my comments regarding each business segment; however, in the aggregate and on a pre-tax basis, we estimate that currency had the largest impact year over year affecting profitability by approximately $15 million dollars, 1 followed by volume and mix changes which affected year over year profitability by approximately $10 million dollars. Note, however, that the mix of these factors on an aggregate basis varies greatly from segment to segment. In addition, net interest costs rose by $3.1 million reflecting lower earnings from available cash, higher borrowing rates associated with the unwinding during the first quarter of fixed to variable interest rate swaps, and higher foreign borrowings. Now let's look at the business by its respective segments. Compressor sales in terms of dollars rose by $13.5 million or 6%, with the effects of currency translation more than explaining the increase. While aggregate volumes remained fairly flat, mix of sales shifted from compressors used in air conditioning to those used in residential and commercial refrigeration applications. Compressor segment operating results were down $11.4 million or 61% in comparison to the prior year. The single largest factor, which more than accounts for the overall change, was the affect of a weaker U.S. Dollar versus the Brazilian Real. The average book keeping rate for the second quarter 2005 had the U.S. Dollar 17% weaker versus the Real in comparison to the second quarter in 2004. If you will recall, the Dollar was approximately 10% weaker year over year during the first quarter. The outlook in the Compressor Group for the balance of the year is the same as we expressed at the end of the first quarter. While recent warm weather is helping with aftermarket volumes in the third quarter, this effect will be short-lived. Currency still remains the big story, and in the absence of any improvement, results in the segment for the remainder of 2005 will lag those of the prior year. Moving to the Electrical Components Group -- for the quarter, the Group reported sales of $102.4 million compared to $105.2 million a year ago. Volume declines were primarily attributable to the automotive sector reflecting lower customer build schedules and our customer's share with their OEMs. Electrical Components operating income for the quarter was $200,000 compared to $4.0 million a year ago. The decline in operating results is due to the lower sales volumes, higher commodity costs in excess of pricing recoveries, and operational inefficiencies related to the closure of the St. Claire, Missouri facility. These factors were offset by lower amortization of intangible assets. The cost of copper is still very high and continues to rise. Price increases have not fully covered commodity and other cost increases in this segment. Further price increases have been implemented since the first quarter, and additional price increases will be likely if raw material costs continue to rise. In addition, during the second quarter, the Company began more aggressive cost cutting and productivity improvements, including headcount reductions totaling 220 people since March 31, 2005. Looking forward into the rest of the year for the Electrical Components business, we expect results to lag those of the prior year, but to improve sequentially quarter over quarter as pricing actions and cost reduction actions take effect. Now let's look at the Engine & Power Train Group. Second quarter results were similar to the first quarter. Sales in the Engine & Power Train Group were down $25.3 million or 24% 2 from the prior year's quarter. The decrease was primarily attributable to the previously described loss of business at Sears, lower volumes in Europe, and a weak pull through in the latter half of the U.S. green season. On a more positive note, we have recaptured a significant snow sku, and the snow season continues to look very strong. The Group's operating results declined by $4.8 million in comparison to the prior year's second quarter. This decline is attributable to the 24% decline in sales; however, in comparison to the first quarter of 2005, this result is an improvement of $5.4 million due to cost improvement actions and the non-recurrence of warranty costs associated with a transmission recall. Other notable items to report include the successful renewal of our labor contract with employees of the Company's New Holstein, Wisconsin facility and the engagement of AlixPartners to accelerate our cost reduction activities within the Engine & Power Train Group. While we were well on our way to completing certain transitions to our Brazilian facility and the associated cost reductions, Company management felt that even more could be accomplished if additional resources were brought to bear. AlixPartners' Performance Improvement Group has a proven track record, and we believe their involvement will be beneficial to our customers and our shareholders. In connection with their engagement, James J. Bonsall will lead the global group. Looking forward to the second half of the year for the Engine & Power Train business, we anticipate results in the third quarter that are improved in comparison to the first half of 2005, but slightly off of the numbers of the third quarter 2004. Results in the fourth quarter will largely depend on the outcome of line reviews currently taking place and the associated volumes for the next green season. Currently, we believe sales will be down but profits improving on associated cost cutting from the elimination of duplicate capacities. Now for the Pump Group -- as anticipated, sales declined by $7.9 million or 19% over the prior year. The decline was attributable to the previously disclosed loss of water gardening business at Lowes to a Chinese-sourced competitor. Sales of such products occur disproportionately in the first half of the year. These declines were partially offset by increases in pumps sold to the HVAC market, other retailers, and the industrial market. The decline in operating profit of $600,000 is attributable to the net volume decline, partially offset by cost saving actions. Now that we have covered the segments, let's address the balance sheet. As previously disclosed, we renegotiated the terms of our lending agreements with the holders of our Senior Guaranteed Notes and the banks who provide our revolving credit line. The amendments to these agreements relax certain covenants, while adding others. Other key terms of the amendments include, the Company providing a security interest in many of its assets, paying a higher rate of interest, and a potential limitation on dividends beginning in the fourth quarter. Under the agreement, the Company may pay dividends up to current levels beginning with the third quarter 2005. After the third quarter; however, dividend payments are permitted to the extent the Company meets certain financial targets and remains in compliance with all covenants. 3 In conclusion, the second quarter results, while not what the Company views as acceptable, were in line with expectations under the turn-around plans we established after the first quarter. We continue our campaign of cost cutting; however, our long term success still lies in the new products and service capabilities that are under development. That concludes my prepared comments for this morning. I will now take your questions. 4 -----END PRIVACY-ENHANCED MESSAGE-----