-----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, J+efhM1UOYeT+6WwhBE/+YdhjW+AC38DqEVROF+ehq06ckC5AMWB+oytIuv8UXNp wztuAkuAAO0JkSGFxPhQ+A== 0000950124-95-003686.txt : 19951119 0000950124-95-003686.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950124-95-003686 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 95589714 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 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 September 30, 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 October 31, 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) September 30, December 31, 1995 1994 ============================================================================================================== ASSETS CURRENT ASSETS: Cash and cash equivalents $ 299.7 $ 283.2 Accounts receivable, trade, less allowance for doubtful accounts of $6.9 million in 1995 and $5.8 million in 1994 230.3 191.6 Inventories 241.2 235.3 Deferred income taxes 34.1 38.4 Other current assets 13.8 7.8 - -------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 819.1 756.3 PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation of $410.1 million in 1995 and $379.1 million in 1994 460.7 402.4 EXCESS OF COST OVER ACQUIRED NET ASSETS 61.1 58.0 DEFERRED INCOME TAXES 26.1 21.4 PREPAID PENSION EXPENSE 35.7 31.8 OTHER ASSETS 20.4 19.9 - -------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $1,423.1 $1,289.8 ============================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $ 139.1 $ 116.5 Income taxes payable 11.6 5.1 Short-term borrowings 11.0 11.7 Accrued liabilities 129.0 118.8 - -------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 290.7 252.1 LONG-TERM DEBT 9.0 9.1 NON-PENSION POSTRETIREMENT BENEFITS 172.8 169.8 PRODUCT WARRANTY AND SELF-INSURED RISKS 31.5 29.5 ACCRUAL FOR ENVIRONMENTAL MATTERS 30.7 30.7 PENSION LIABILITIES 13.8 13.1 - -------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 548.5 504.3 - -------------------------------------------------------------------------------------------------------------- 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 802.7 724.0 Foreign currency translation adjustment 20.1 9.7 - -------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 874.6 785.5 - -------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,423.1 $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 Three Months Ended Nine Months Ended except per share amounts) September 30, September 30, ------------------- ------------------ 1995 1994 1995 1994 ============================================================================================================== INCOME: Net sales $392.7 $355.0 $1,333.6 $1,166.2 Interest income 6.3 8.7 21.8 20.0 Other income 3.9 1.7 8.5 5.2 - -------------------------------------------------------------------------------------------------------------- TOTAL INCOME 402.9 365.4 1,363.9 1,191.4 - -------------------------------------------------------------------------------------------------------------- EXPENSES: Cost of sales and operating expenses 339.2 299.2 1,136.1 974.2 Selling and administrative expenses 21.7 20.8 69.5 64.5 Interest expense 1.9 1.4 5.9 4.3 Other expenses -- 0.4 0.1 2.1 - -------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 362.8 321.8 1,211.6 1,045.1 - -------------------------------------------------------------------------------------------------------------- INCOME BEFORE TAXES ON INCOME 40.1 43.6 152.3 146.3 Taxes on income 15.2 16.7 57.2 54.5 - -------------------------------------------------------------------------------------------------------------- NET INCOME $ 24.9 $ 26.9 $ 95.1 $ 91.8 ============================================================================================================== NET INCOME PER SHARE $ 1.14 $ 1.23 $ 4.35 $ 4.19 ============================================================================================================== CASH DIVIDENDS DECLARED PER SHARE $ 0.25 $ 0.20 $ 0.75 $ 0.60 ==============================================================================================================
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)
Nine Months Ended (Dollars in millions) September 30, --------------------- 1995 1994 =================================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 95.1 $ 91.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 44.5 41.8 Accounts receivable (37.2) (36.0) Inventories (3.5) (24.1) Payables and accrued expenses 36.2 30.9 Other (4.7) 12.8 - ------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATIONS 130.4 117.2 - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (98.0) (105.8) - ------------------------------------------------------------------------------------------------------------------- CASH USED IN INVESTING ACTIVITIES (98.0) (105.8) - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (16.4) (13.1) Decrease in borrowings, net (1.6) (5.7) - ------------------------------------------------------------------------------------------------------------------- CASH USED IN FINANCING ACTIVITIES (18.0) (18.8) - ------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 2.1 10.8 - ------------------------------------------------------------------------------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS 16.5 3.4 CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD 283.2 313.2 - ------------------------------------------------------------------------------------------------------------------- END OF PERIOD $299.7 $316.6 ===================================================================================================================
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) September 30, December 31, 1995 1994 ============================================================================================== Raw material and work in process $156.6 $147.6 Finished goods 69.7 74.3 Supplies 14.9 13.4 ---------------------------------------------------------------------------------------------- $241.2 $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 September 30, 1995, the Company had an accrual of $30.8 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 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - ITEM 1 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED The EPA has indicated it expects to issue a record of decision on the cleanup of the Sheboygan River and Harbor Site in the second quarter of 1996, 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 underway 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 On Moore, Smith & Dale Letterhead November 8, 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 September 30, 1995, and the related consolidated condensed statements of income and cash flows for the three months and nine months ended September 30, 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. /s/ 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 The Company's sales for the third quarter of 1995 reached $392.7 million and were 11% higher than the same period in 1994. Consolidated earnings of $24.9 million, or $1.14 per share, were down from the record setting $1.23 per share earned in the third quarter of 1994. The Company's refrigeration and air conditioning compressor business remained strong on a worldwide basis, but was offset by a weaker performance in the Company's North American engine business. Nine months earnings of $95.1 million, or $4.35 per share, compared favorably with $91.8 million, or $4.19 per share, for the same period in 1994. The following table presents results by business segments:
Three Months Ended Nine Months Ended (Dollars in millions) September 30, September 30, ------------------ ------------------- 1995 1994 1995 1994 ============================================================================================================== NET SALES: Compressor Products $266.6 $207.6 $ 868.7 $ 673.6 Engine and Power Train Products 107.6 128.2 393.4 418.6 Pump Products 18.5 19.2 71.5 74.0 - -------------------------------------------------------------------------------------------------------------- TOTAL NET SALES $392.7 $355.0 $1,333.6 $1,166.2 ============================================================================================================== INCOME BEFORE TAXES ON INCOME: Compressor Products $ 26.3 $ 18.8 $ 89.7 $ 67.4 Engine and Power Train Products 10.3 17.9 44.2 59.8 Pump Products 1.7 2.5 9.7 11.7 Corporate Expenses (2.6) (2.9) (7.2) (8.3) Net Interest Income 4.4 7.3 15.9 15.7 - -------------------------------------------------------------------------------------------------------------- INCOME BEFORE TAXES ON INCOME $ 40.1 $ 43.6 $ 152.3 $ 146.3 ==============================================================================================================
Page 8 9 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED Compressor Products The Company's worldwide Compressor Products sales for the third quarter of 1995 reached $266.6 million and were 28% higher than the previous year period. Recent and ongoing capacity expansion allowed the Company to make significant volume increases in air conditioning compressor shipments to help meet hot weather induced shortages in the U.S. and abroad. U.S. sales of the TP compressor for household refrigeration also had significant gains over the prior year. In North America, sales of unitary central air conditioning compressors were solid with double-digit growth, and U.S.-built exports, particularly to the Asia-Pacific region, gained over the previous year period. Strong European sales noted in the first and second quarters of 1995 continued into the third quarter. The Brazilian domestic demand remained strong for refrigeration products, despite a general weakening in consumer demand. Sales for the first nine months were 29% higher than the prior year period in 1994. The sales increase was principally due to higher sales volume discussed above and, to a lesser extent, due to the translation effect of a weaker U.S. dollar and to selling price increases. Compressor Products operating margin was 9.9% for the third quarter of 1995 as compared to 9.1% for the previous year period. Raw material cost increases, start-up costs on new compressor lines and currency-driven reductions in export margins of the Company's Brazilian and French operations continued to offset the favorable effects of increased sales volume. These factors had similar effects on year-to-date margins, and are expected to continue into the fourth quarter of 1995. Global demand for refrigeration and air conditioning products is expected to rise over the next several years as developing economies improve their standard of living. The Company is well into major capacity expansion programs in Tupelo, Mississippi (room air conditioning compressors), and Sao Carlos, Brazil (household refrigeration compressors) to meet the anticipated increase in worldwide demand. In addition, progress continues on the introduction of the new scroll compressor which is expected to have modest sales in 1996. These strategic investments may somewhat restrain short-term earnings growth but are expected to reap significant long-term benefits. Overall financial results for the Company's Brazilian subsidiary in the third quarter of 1995 remained strong, primarily due to substantial sales increases in both its domestic and export markets. Margins decreased primarily as a result of a continued overvalued currency as compared to the U.S. dollar. For the third quarter of 1995, the Brazilian subsidiary contributed 20% of consolidated compressor sales and 41% of segment operating profit, versus 17% of consolidated compressor sales and 50% of segment operating profit in the same period in 1994. Although the country's 1994 economic program has been its most successful in recent history, economic uncertainties persist as it struggles with an economic slowdown resulting from very high consumer interest rates and significantly increased import tariffs on automobiles and certain other consumer durable goods. Page 9 10 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED Engine and Power Train Products Worldwide Engine and Power Train Products sales were $107.6 million in the third quarter of 1995, a 16% decrease compared to the same period in 1994. Reduced snowfall levels in the winter of 1995 caused third quarter snow thrower engine sales to decline 36% as compared to the prior year period. This decrease was somewhat offset by increased European sales by the Company's Italian subsidiary, Tecumseh Europa. For the first nine months of 1995, the Company's Engine and Power Train Products sales were $393.4 million, a decrease of 6% over the prior year period. The year-to- date sales decrease was due to the lower snow thrower engine sales and a decrease in walk-behind lawn mower engines resulting from an unusually cool spring in the North East and North Central United States. Volume reductions of higher margin snow product, coupled with higher aluminum prices caused third quarter operating margins to decrease to 9.5% as compared to 14% in the previous year period. Year-to-date operating margins decreased from 14.3% to 11.2% because of decreased snow thrower and walk-behind lawn mower engine sales along with the higher aluminum costs. The cool spring, consumer economic uncertainty and summer drought have caused several lawn and garden customers to curtail production. This situation, coupled with the reductions in snow engine demand, will likely result in sig- nificantly lower engine sales for the fourth quarter, as compared with the same period in 1994. Early next year, the Company plans to begin limited production of reduced exhaust emission engines and carburetors in a recently purchased manufacturing facility in Douglas, Georgia. Expansion of the existing structure is currently underway. Total planned investment for the facility is $40 million. Pump Products The Company's Pump Products sales for the third quarter and first nine months of 1995 were both 3% below the same periods in 1994. Margins have been somewhat reduced as the Company has worked aggressively to expand its product offering and customer base in increasingly competitive markets. Interest Income Interest income for the third quarter of 1995 was down from the same period in 1994 primarily due to lower financial income reported by the Company's Brazilian subsidiary. During the second quarter of 1995, the Company reduced its cash position in Brazil to better protect itself from potential currency devaluations. Additionally, real interest rates in Brazil were lower during the third quarter of 1995 than immediately after the currency conversion of June 30, 1994. Page 10 11 TECUMSEH PRODUCTS COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION -- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION, CONTINUED Income Taxes The effective income tax rates were 37.9% for the third quarter and 37.6% for the first nine months of 1995, and were comparable with the same periods in 1994. LIQUIDITY AND CAPITAL RESOURCES The Company continued to maintain a strong and liquid financial position. Working capital of $528.4 million at September 30, 1995 was up from $504.2 million at December 31, 1994, and the ratio of current assets to current lia- bilities approximated 2.8. As with 1994, the Company's capital spending for the first nine months of 1995 was over twice the level of its depreciation. Total capital spending for the entire year of 1995 should approximate $140 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 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 11 12 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 September 30, 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: November 13, 1995 By: /s/ JOHN H. FOSS ---------------------- ------------------------------------ John H. Foss Vice President, Treasurer and Chief Financial Officer Page 12 13 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO. - ------- ----------- -------- EX-27 Financial Data Schedule
EX-27 2 EX-27
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 299,700 0 237,200 6,900 241,200 819,100 870,800 410,100 1,423,100 290,700 0 21,900 0 0 852,700 1,423,100 1,333,600 1,363,900 1,136,100 1,136,100 100 0 5,900 152,300 57,200 95,100 0 0 0 95,100 4.35 4.35
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