-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VH/OAC395lP+41VIkDe6VAiEaFN+VR9WdlYLIADYrr3+Tw00sTEQrQSDCSAxen77 JDx3qnNmw/tfFEvEuQVPsQ== 0000950124-95-001473.txt : 19950517 0000950124-95-001473.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950124-95-001473 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00452 FILM NUMBER: 95537669 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 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the transition period from______to______ COMMISSION FILE NUMBER: 0-452 TECUMSEH PRODUCTS COMPANY (Exact name of registrant as specified in its charter) MICHIGAN 38-1093240 (State of Incorporation) (IRS Employer Identification Number) 100 EAST PATTERSON STREET TECUMSEH, MICHIGAN 49286 (Address of Principal Executive Offices) Telephone Number: (517) 423-8411 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class of Stock Outstanding at April 30, 1995 ------------------------------------------------------------------------------ Class B Common Stock, $1.00 par value 5,470,146 Class A Common Stock, $1.00 par value 16,410,438
2 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited and subject to year end adjustments) (Dollars in millions)
March 31, December 31, 1995 1994 ---------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $273.4 $283.2 Accounts receivable, trade, less allowance for doubtful accounts of $6.2 million in 1995 and $5.8 million in 1994 275.3 191.6 Inventories 249.0 235.3 Deferred income taxes 35.1 38.4 Other current assets 9.0 7.8 ---------- ----------- TOTAL CURRENT ASSETS 841.8 756.3 PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation of $394.8 million in 1995 and $379.1 million in 1994 424.9 402.4 EXCESS OF COST OVER ACQUIRED NET ASSETS 62.3 58.0 DEFERRED INCOME TAXES 22.7 21.4 PREPAID PENSION EXPENSE 33.7 31.8 OTHER ASSETS 19.4 19.9 ---------- ----------- TOTAL ASSETS $1,404.8 $1,289.8 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $151.0 $116.5 Income taxes payable 24.7 5.1 Short-term borrowings 14.7 11.7 Accrued liabilities 133.1 118.8 ---------- ----------- TOTAL CURRENT LIABILITIES 323.5 252.1 LONG-TERM DEBT 9.0 9.1 NON-PENSION POSTRETIREMENT BENEFITS 171.3 169.8 PRODUCT WARRANTY AND SELF-INSURED RISKS 30.5 29.5 ACCRUAL FOR ENVIRONMENTAL MATTERS 30.7 30.7 PENSION LIABILITIES 13.3 13.1 ---------- ----------- TOTAL LIABILITIES 578.3 504.3 ---------- ----------- STOCKHOLDERS' EQUITY: Class A common stock, $1 par value; authorized 75,000,000 shares; issued and outstanding 16,410,438 shares 16.4 16.4 Class B common stock, $1 par value; authorized 25,000,000 shares; issued and outstanding 5,470,146 shares 5.5 5.5 Capital in excess of par value 29.9 29.9 Retained earnings 753.4 724.0 Foreign currency translation adjustment 21.3 9.7 ---------- ----------- TOTAL STOCKHOLDERS' EQUITY 826.5 785.5 ---------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,404.8 $1,289.8 ========== ===========
The accompanying notes are an integral part of these statements. Page 2 3 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited and subject to year end adjustments) (Dollars in millions except per share amounts)
Three Months Ended March 31, ------------------------- 1995 1994 ------------- ----------- INCOME: Net sales $473.6 $386.4 Interest income 8.2 5.9 Other income 1.6 1.5 ------------- ----------- 483.4 393.8 ------------- ----------- EXPENSES: Cost of sales and operating expenses 401.8 323.6 Selling and administrative expenses 23.8 21.0 Interest expense 2.0 1.2 Other expenses 0.1 1.7 ------------- ----------- 427.7 347.5 ------------- ----------- INCOME BEFORE TAXES 55.7 46.3 Taxes on income 20.8 17.3 ------------- ----------- NET INCOME $34.9 $29.0 ============= ========== NET INCOME PER SHARE $1.59 $1.32 ============= ========== CASH DIVIDENDS DECLARED PER SHARE $0.25 $0.20 ============= ==========
The accompanying notes are an integral part of these statements. Page 3 4 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited and subject to year end adjustments) (Dollars in millions)
THREE MONTHS ENDED MARCH 31, ------------------ 1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $34.9 $29.0 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15.1 13.9 Accounts receivable (80.0) (69.2) Inventories (12.0) (1.2) Payables and accrued expenses 61.6 39.7 Other 1.6 2.5 ---------- --------- CASH PROVIDED BY OPERATIONS 21.2 14.7 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (34.6) (31.8) ---------- --------- CASH USED IN INVESTING ACTIVITIES (34.6) (31.8) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (5.5) (4.4) Increase (Decrease) in borrowings, net 2.1 (1.3) ---------- --------- CASH USED IN FINANCING ACTIVITIES (3.4) (5.7) ---------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 7.0 3.7 ---------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (9.8) (19.1) CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 283.2 313.2 ---------- --------- END OF PERIOD $273.4 $294.1 ========== =========
The accompanying notes are an integral part of these statements. Page 4 5 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. The condensed consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The December 31, 1994 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report for the fiscal year ended December 31, 1994. Due to the seasonal nature of the Company's business, the results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year. The financial data required in this Form 10-Q by Rule 10.01 of Regulation S-X have been reviewed by Moore, Smith & Dale, the Company's independent certified public accountants, as described in their report contained elsewhere herein. 2. Inventories consisted of:
(Dollars in Millions) March 31, December 31, 1995 1994 ---------- ---------- Raw material and work in process $159.2 $147.6 Finished goods 75.9 74.3 Supplies 13.9 13.4 --------- -------- $249.0 $235.3 ========= ========
3. The Company has been named by the U.S. Environmental Protection Agency (EPA) as a potentially responsible party in connection with the Sheboygan River and Harbor Superfund Site in Wisconsin. At March 31, 1995, the Company had an accrual of $31.7 million ($31.9 million at December 31, 1994) for the estimated costs associated with the cleanup of certain PCB contamination at this Superfund Site. The Company has based the estimated cost of cleanup on ongoing engineering studies, including engineering samples taken in the Sheboygan River, and assumptions as to the areas that will have to be remediated along with the nature and extent of the remediation that will be required. Significant assumptions underlying the estimated costs are that remediation will involve innovative technologies, including (but not limited to) bioremediation near the Company's plant site and along the Upper River, and only natural armoring and bioremediation in the Lower River and Harbor. Page 5 6 The EPA has indicated it expects to issue a record of decision on the cleanup of the Sheboygan River and Harbor Site during the latter half of 1995, but the ultimate resolution of the matter may take much longer. Ultimate costs to the Company will be dependent upon factors beyond its control such as the scope and methodology of the remedial action requirements to be established by the EPA (in consultation with the State of Wisconsin), rapidly changing technology, and the outcome of any related litigation. The Company, in cooperation with the Wisconsin Department of Natural Resources, is conducting an investigation of soil and groundwater contamination at the Company's Grafton, Wisconsin plant. Certain test procedures are being planned over the next year to assess the extent of contamination and to develop remedial options for the site. While the Company has provided for estimated investigation and on-site remediation costs, the extent and timing of future off-site remediation requirements, if any, are not presently determinable. In addition to the above mentioned sites, the Company also is currently participating with the EPA and various state agencies at certain other sites to determine the nature and extent of any remedial action which may be necessary with regard to such other sites. Based on limited preliminary data and other information currently available, the Company has no reason to believe that the level of expenditures for potential remedial action necessary at these other sites will have a material effect on its financial position. 4. Various lawsuits and claims, including those involving ordinary routine litigation incidental to its business, to which the Company is a party, are pending, or have been asserted, against the Company. Although the outcome of these matters cannot be predicted with certainty, and some may be disposed of unfavorably to the Company, management has no reason to believe that their disposition will have a materially adverse effect on the consolidated financial position of the Company. Page 6 7 [MOORE, SMITH & DALE LETTERHEAD] May 10, 1995 INDEPENDENT ACCOUNTANTS' REPORT Tecumseh Products Company Tecumseh, Michigan We have reviewed the consolidated condensed balance sheet of Tecumseh Products Company and Subsidiaries as of March 31, 1995, and the related consolidated condensed statements of income and cash flows for the three months ended March 31, 1995 and 1994. These financial statements are the responsibility of the Company's management. We have conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 17, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 1994, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. MOORE, SMITH & DALE ---------------------------- CERTIFIED PUBLIC ACCOUNTANTS Page 7 8 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Sales for the first quarter of 1995 reached a record level of $473.6 million and were 23% higher than the same period in 1994. Consolidated earnings of $34.9 million, or $1.59 per share, were 20% higher than the first quarter of 1994. The improved operating results reflect sales increases in each of the Company's business segments as well as sales increases in each major geographic region. The following table presents results by business segments:
Three Months Ended (Dollars in millions) March 31, --------------------------------- 1995 1994 ============================================================================================== NET SALES: Compressor Products $ 283.3 $ 219.4 Engine and Power Train Products 160.6 137.7 Pump Products 29.7 29.3 ---------------------------------------------------------------------------------------------- Total Net Sales $ 473.6 $ 386.4 ============================================================================================== INCOME BEFORE INCOME TAXES: Compressor Products $26.4 $20.1 Engine and Power Train Products 20.5 19.1 Pump Products 4.8 5.0 Corporate Expenses (2.2) (2.6) Net Interest Income 6.2 4.7 ---------------------------------------------------------------------------------------------- Total Income Before Income Taxes $ 55.7 $ 46.3 ==============================================================================================
Compressor Products The Company's worldwide Compressor Products sales for the first quarter of 1995 reached $283.3 million and were 29% higher than the prior year period. The sales increase was principally due to higher sales volume and, to a lesser extent, due to the translation effect of a weaker U.S. dollar and to selling price increases. Global demand for compressors remained very strong, particularly rotary compressors and small reciprocating compressors. Tecumseh's rotary compressors, which are used in room air conditioners, are built primarily in the United States while the Company's fractional horsepower reciprocating compressors, used in household and commercial refrigeration equipment, are primarily built in Brazil and France. As a result, each of the Company's compressor operating units reported sales increases in excess of 20% for the first quarter of 1995. Compressor Products operating margin for the first quarter of 1995 was 9.3%, compared with 9.2% for the same period in 1994. The positive effects of increased volume and price increases were offset by several factors. Inflationary pressure on key material components such as steel and copper have increased significantly during the past year. The Company is in Page 8 9 various stages of tooling for and beginning production of three significant investments: a small rotary compressor line in Tupelo, Mississippi; an entirely new scroll compressor facility in Tecumseh, Michigan; and a refrigerator compressor line in Brazil. The start-up costs of these new lines negatively impacted margins for the quarter. Lastly, the weaker U.S. dollar reduced the export margins of the Company's Brazilian and French operations. Overall financial results for the Company's Brazilian subsidiary remained strong for the quarter. Although the country's 1994 economic program has been its most successful in recent history, economic uncertainties persist following the Brazilian government's handling of a March 1995 currency devaluation along with the recent imposition of significant import tariffs. The Company has recently reduced its Brazilian currency exposure which will lower the Company's financial income but provide protection from further currency devaluation. Engine and Power Train Products Worldwide Engine and Power Train Products sales were $160.6 million in the first quarter of 1995, a 17% increase over the same period in 1994. This gain was due to continued customer production of snow throwers in 1995 to fill depleted pipelines, continued acceptance of Tecumseh's Enduro engine for lawn tractors, penetration into other outdoor chore product applications, and an increase in sales of power train products. Profit margins for this segment decreased from 13.8% in the first quarter of 1994 to 12.8% in 1995. The favorable effects of increased volume and a more profitable product mix were more than offset by the higher cost of raw materials, particularly aluminum which is a significant cost factor in the production of virtually all of the Company's engines. The favorable year-to-year sales and earnings comparisons for this segment are not likely to continue in the second quarter of 1995. The second quarter of 1994 included strong snow engine production following the heavy snowfalls of that winter. Despite a mild winter in 1995, snow thrower production occurred throughout the season to refill pipelines. Consequently, the Company expects that snow engine production for the remainder of 1995 will be well below the 1994 levels. Additionally, orders for walk-behind lawn mower engines have begun to soften as cool weather conditions have hampered early spring sales and major customers are adjusting inventory levels. Pump Products The Company's Pump Products sales for the first quarter of 1995 were 1% higher than the same period in 1994. Sump pump sales in early 1994 were quite strong due to flooding in New England and along the east coast. However, the sales decline on sump pumps was more than offset by growth in pump product sales to industrial segments. Interest Income Interest income for the first quarter of 1995 was up from the same period in 1994 due primarily to higher financial income reported by the Company's Brazilian subsidiary, which held higher cash positions (denominated in local currency) in the first quarter of 1995 than it had one year earlier. As was mentioned above, the Company has recently reduced its cash products in Brazil to better protect it from future currency devaluations. LIQUIDITY AND CAPITAL RESOURCES The Company continued to maintain a strong and liquid financial position. Working capital of $518.3 million at March 31, 1995 was up from $504.2 million at December 31, 1994, and Page 9 10 the ratio of current assets to current liabilities approximated 2.6. As with 1994, the Company's capital spending for the first quarter of 1995 was over twice the level of its depreciation. Total capital spending for the entire year of 1995 should approximate $150-175 million as the Company expects to substantially complete the three compressor investments discussed above along with expanding capacity of both its engine and pump businesses. Working capital requirements and planned capital expenditures for the remainder of 1995 and early 1996 are expected to be financed through internally available funds, although the Company may utilize long-term financing arrangements in connection with various state investment incentives. Page 10 11 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) None. (b) The Company did not file any reports on Form 8-K during the three months ended March 31, 1995. SIGNATURE 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, thereunto duly authorized: TECUMSEH PRODUCTS COMPANY (Registrant) Dated May 12, 1995 By JOHN H. FOSS ___________________________________ John H. Foss Vice President, Treasurer and Chief Financial Officer Page 11 12 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule EX-27 2 EXHIBIT 27
5 ART. 5 FDS FOR 1ST QUARTER 10-Q 1,000 3-MOS DEC-31-1995 MAR-31-1995 273,400 0 281,500 6,200 249,000 841,800 819,700 394,800 1,404,800 323,500 0 21,900 0 0 804,600 1,404,800 473,600 483,400 401,800 401,800 100 0 2,000 55,700 20,800 34,900 0 0 0 34,900 1.59 1.59
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